We’re going to let you in on a little secret: anybody can save more, regardless of your income.
Here’s a few tips for getting started and sticking to it.
1. Make saving a priority, not an afterthought
Let’s start with the right mindset. As money wizard Warren Buffett once said, “Don’t save what’s left after spending. Spend what’s left after saving.”
That means planning to save and setting money aside on a regular basis. Making it an ongoing habit, built into the budget we’re about to create.
2. Follow the 50-20-30 budget rule
Next, let’s be realistic. Being over-ambitious can quickly derail you. Setting aside more money than you can afford fowls up any plan, just like saving too little and falling short.
So follow the 50-20-30 budget rule. It was popularized by Senator Elizabeth Warren in her book, All Your Worth: The Ultimate Lifetime Money Plan. It’s a great tool to help plan your finances and figure out what percentage of your after-tax income should go into savings.
Here’s a basic breakdown:
The rule works for just about anybody, with any income. (Apply it to your income after taxes are taken out, which most employers do with every paycheck.) It’s a simple way to balance your savings goals with everyday spending. Use it to set your savings goals every month.
Rule for budgeting.
3. Autopilot your savings
Once you’ve set your 20% goal, make it automatic. Set up automatic monthly transfers from your checking account (where your paycheck gets deposited) to a linked savings account (where your savings are set aside, away from everyday spending).
4. Make your savings work for you
Check the APR (annual percentage rate) on your savings account and compare it with other saving tools, like a certificate of deposit (CD) or a money market account. You might find tools like those that pay more interest and keep your money working even harder. Your bank probably offers them, along with easy transfers.
5. Try using a personal finance app
A slew of apps are designed to plan and automate saving, including Bright. Apps can typically help with these essential chores:
Bright goes several steps further, using data science to find the fastest, smartest ways to help you save more… while also paying off your credit card debt.
6. Pay off your credit cards
What do your cards have to do with your savings? Everything. They both draw from the same pot. The sooner you pay off your card, the sooner you can start saving more. Plus, the interest you’re paying on your credit cards costs you money every month - funds that could be earning you interest in a savings account.
7. Use your employer’s 401(k)
401(k) funds are common savings tools, with automatic deposits straight from your paycheck. They have strong tax advantages - you don’t pay taxes on the funds you deposit in the fund until you’re at retirement age, when your income level and tax bill are likely to be lower. They often out-perform regular savings accounts too, typically with mutual funds that earn more over the long term.
They’re offered by employers, and there’s an extra advantage when they match your 401(k) contributions with partial or dollar-for-dollar funds, building your savings even faster.
8. Bright can help you save more
Making a regular habit of saving is essential to achieving financial stability. The more often you save, the sooner your money earns interest. Your personal Bright Plan can help, finding faster, smarter ways to save - and build more wealth.
How Much Income You Should Save Each Month
Amit is a Computer Science graduate from I.I.T Kanpur. He is a highly experienced data science system builder. He was with InMobi for 7 years