After ringing in the New Year, many people are getting back to business. For some this means devoting more energy to saving more and spending less. Indeed it’s the most popular financial resolution for 2017 according to GOBankingRates, which found that nearly 23 percent of people polled vowed to do this in the coming year. It’s not so surprising given the findings from another GOBankingRates’ survey that found 69 percent of Americans have less than $1,000 in a savings account.
While saving money isn’t easy, there are steps you can take to make it a less-daunting task and improve your overall financial health in the process. Here are a few suggestions to get you started:
Make a Budget—and Stick to It
Many people don’t budget because it feels overwhelming to them to deal with so many numbers. But budgeting doesn’t have to be complicated. A simple Excel spreadsheet will do the trick. First identify how much money you have coming in on a monthly basis. Then track your spending in all areas for at least a month or two. Don’t forget to include the little things like the cup of coffee you bought on your way to work, or the tip at the hair salon. After a month or two, you’ll have a better idea of how you are spending your money, how much you are saving—and where you might be able to trim some of your expenses in order to save more.
Increase Your Savings Rate
As a general rule of thumb, you should aim to follow the widely used 50/30/20 rule. This means setting aside 50 percent of your budget for essentials like rent or house payments and food, 30 percent for discretionary spending, and at least 20 percent for savings. While getting to this savings rate can be difficult for some, it’s important to try to meet or exceed this goal.
Even if you think you’re socking away all you can, you may want to take a fresh look at your expenses to see if there are ways to cut back without negatively impacting your lifestyle in order to allow you to save more. Every little bit counts, and small cuts can make a meaningful difference in how much you save.
Automate Your Investing
If you need a way to boost your savings and ensure you are saving consistently, setting up an automatic funds transfer can be useful. You can set up a recurring transfer from your checking to a savings or investment account. Or you could have a portion of your paycheck directed into a tax-advantaged retirement account such as a 401(k). Once you’ve set up the process, investing is pretty much on autopilot, meaning you don’t have to think each month about how much you are setting aside.
At Align, we are there for you every step of the way, helping you meet your financial objectives through ongoing planning and investment advice. Please don’t hesitate to reach out so we can work with you to meet your goals.