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.
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, setting money aside on a regular basis. Make it an ongoing habit, built into the budget we’re about to create.
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 can fowl 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:
- 50% for essential needs
- 20% to savings
- 30% on wants and unexpected expenditures
The rule works for just about anybody, with any income. It’s a simple way to balance your savings goals with everyday spending. Use it to set your savings goals every month.
Rule of budgeting.
Autopilot your savings
Once you’ve set your 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).
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.
Try using a personal finance app
A slew of apps are designed to plan and automate saving, including Bright Money. Apps can typically help with these essential chores:
- Scheduling automated payments to your savings account
- Get you better returns on your savings
- Personalizing your budget and spending breakdowns
- Giving you savings tips
Bright Money goes one or two steps further, using data science to find the fastest, smartest ways to help you save more… while also paying off your credit card debt.
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.
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 also out-perform regular savings accounts, 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.
Bright can help you save more
Making a regular habit of savings is essential to achieving financial stability. The more often you save, the sooner your money earns interest. The Bright app can help, finding faster, smarter ways to save - and build more wealth.