Let’s face it, saving money is a bitch. But all the big stuff in life — car, college, marriage, kids, travel — have equally big dollar signs attached. To minimize debt, saving for these expenditures ahead of time is important. Here are six effective strategies to set money aside — and keep it there.
My favorite personal finance dude at Man v Debt advocates minimizing accounts. Unless you struggle to track your finances, which is now made easy by digital banking, this is unnecessary. The single best strategy for saving is to set up a separate account for the money with no cards attached. Do this for EVERY goal that you need to save for in order to accomplish. This way, that saved money is hard to get; you have to walk into a bank or actually transfer it out. Impulses: denied! It also forces you to keep a minimum balance, which can be helpful in keeping money there.
Name The Separate Accounts
While you are opening said accounts or once they are open, name them, which is normally an online banking option. My checking account says “discretionary”, one of my savings accounts says “textbooks,” a second one is “living,” a third is “taxes” and so on. Title your accounts with what the money is for, like “New Baby” or “Kitchen Remodel” or “Paris.” This is a great strategy to provide a cognitive link between your finances and your life.
Direct Deposit To The Accounts
The easiest way to make saving automatic is to split the direct deposit of your paycheck so that some goes straight into the hard-to-reach savings account named after your goal. Direct deposit forms let you specify a percentage or amount of money to transfer in. If you are paid in paper checks, arrange for “automatic transfers” via online banking or with the bank directly. For instance, every 10 days you may transfer $10 into your “Own apartment” account. You won’t miss this money much, and you can increase transfers based on the cost of your target goal.
Invest In Indexes
An easy way to grow savings is to invest some of it in “indexes.” This is like the S+P 100, or the Dow 30 — a sample of leading companies that represent a specific industry (like, retail index) or economy (U.S., or emerging markets, etc). Buying an index fund gets you a little piece of the many firms the index fund owns. It’s cheap because no one “manages” or trades on it. Accordingly, indexes do only as well as the companies they own. Performance tends to be higher growth than the interest on savings accounts, but riskier; if the index falls, so do your savings. You can also arrange automatic transfers from your savings accounts into your E-Trade account, for example. Get ready to start worrying about the Dow!
Minimize The Amount Of $$$ In Your Checking Account
Overspending is the enemy of saving. So keep most of your money out of your checking account, and opt out of overdraft protection. This helps grow your cash, minimizes your losses from a stolen purse, and makes it hard to overspend. If you overcharge your debit card, it will be declined. At first, you may mess up; try not to bounce a check. But it only takes one instance of that humiliation to learn to pay attention and track purchases.
Make A Little More Money
My final suggestion is a side job: dog walking, driving seniors around, tutoring, whatever. Something you can do where you put the earnings directly — and only — into your special savings accounts. It’s amazing how doing this helps small amounts add up.
Got any other saving tips to add? Leave your favorites in the comments!
The Money section and all articles within it are sponsored by Free Credit Score; however, the articles are all independently produced by The Frisky and the opinions and views expressed by the writers and experts are their own.