Saving money comes down to two variables: how much you earn and how much you spend. To save more money, you either need to increase your earnings or reduce your spending. Easier said than done though right? Here are a few ideas on how to move the needle.
Earn extra income
If you’re building your career and putting in the hours to earn a promotion or level up your own business, you’re future self is already in your debt, and you likely don’t have a ton of extra time to pick up another income stream. That said, there are a few higher reward ways to squeeze a little extra income out of your schedule. We cover a few of the more promising ones in this article here.
Set a target, track, and stick to a plan
Building a savings plan with a clear goal and tracking it over time gives you a better sense of where you are, where you want to be, and the steps you need to take to get there. Simply going through this process often drives savings through an increased awareness of spending and a more purposeful approach to it. We recommend a target of at least 20% of your income to be put towards savings.
Once you know your target, automating your savings is the most straightforward way of achieving it. Set up a cash sweep out of your bank account or a recurring contribution into your goal-based savings funds to effortlessly hit your goals each month. Paying yourself first in this way is a tried and true method of saving.
Get your match
If your employer provides a match on your 401(k) plan, that’s free money that goes straight into savings for you. Don’t leave that money on the table. Pick it up instead by saving at least up to the matching rate and consider saving a bit more to max out your account each year. You’ll reduce your tax bill by taking advantage of this tax-advantaged account.
Pay down debt
Paying down debt is another way of reducing your expenses. High interest rate debt is expensive to carry. The more quickly you can reduce your spending on interest, the more quickly you can ramp up your savings.
You know the basics of this already and there’s no shortage of websites with suggestions on how to spend a little less money at the local coffee shop, so we won’t add too much to the noise. Here’s a quick reminder on the best things you can do to cut your expenses though: shop around for a deal, cut subscriptions that you don’t need, and be purposeful when you do spend. Know what your expenses are by tracking them and routinely reviewing them to ensure you’re only paying for what you need.
Paying for services cuts two ways. We all know the value of our scarce free time, but if you have the ability and inclination to take on some projects yourself, not only can save a good deal on service expenses, but you also can pick up a new skill in the process. Not to mention the pride you’ll feel at a job well done.
Taxes account for a big chunk out of your paycheck, and you generally don’t want to pay more than you have to. Make sure you’re getting your fair share of deductions by cataloguing donations, logging work related expenses, and generally taking advantage of government incentives. If your taxes are complicated, it’s likely worth it to find a qualified tax specialist to help you out. And don’t forget to invest your refund each year.
Avoid lifestyle creep
Feeling like you need to keep up with the Joneses is a huge emotional challenge, but here’s a secret: in most cases, the Joneses are focused on the Joneses, not on you. Keep your eyes on your prize, upgrade when it’s appropriate, but do it for you.
Invest the proceeds
Every dollar that you don’t spend is one you can invest. And every dollar you invest will compound over time. The earlier you’re able to take advantage of the power of compound interest, the better off you’ll be in the long run and the more you’ll have available to spend however you want. Put another way, your savings now are a much bigger bank account in the future.