Building a Savings Account on a Budget
One of the most important steps to financial freedom is establishing and building a savings account.
How to Grow Savings on a Budget
It’s always advantageous to have a savings account to pull money from instead of turning to a credit card when there is an emergency. But, how do you grow a savings account when you are already on a limited budget? For many people, this is overwhelming.
7 Tips to Grow Savings on a Budget
Don’t look at a savings account as something you must have instantly. Recognize that it takes small, consistent investments to make big changes.
With the right tools in place and a bit of help from a trusted financial institution, it’s possible to build a healthy savings. Here are 7 tips to help you get started.
1. Develop a budget
First and foremost, you can’t save money if you don’t know what’s coming in and what’s going out. Create a budget so you can see what areas it’s possible to cut back.
- Write down everything you spent in the last month on a piece of paper. Organize it by utilities, loans, credit cards, entertainment, and so on. Break it down as much as possible.
- Calculate how much money you brought in last month. Include all sources of income.
- Create a category for each spending area. Then, allocate enough to cover that portion based on what you spent last month. Look for areas to target with savings. For example, could you eat out one less time per month to save $50 or more?
2. Always pay savings account first
Within your budget, try to find room for $50, $100, or even just $10 per paycheck that you can set aside. This amount of money should automatically go into your savings account each time you are paid.
For example, you can open a savings account that automatically withdraws a specific amount from each direct deposit. Will you miss that $25 a paycheck? Probably not, but it is going right into savings. In a month, that’s $50. In a year, that’s $600 in an account.
3. Invest wisely
Every time you head to the grocery store or any other location, think of it as an investment you are making. You aren’t buying groceries, rather investing in food for your family. Make wise decisions.
- Buy what you need. Skip the add-ons that you may not need.
- Create a meal plan for the week and then grocery shop.
- Use coupons, but only on items that you will consume in the next month.
- Base meals around what’s on sale that week.
- Invest in foods that your family needs for nutrition first.
4. Stop using credit
This is perhaps the hardest step, but it can make an incredible difference in your day-to-day life.
Imagine you have a $1000 credit card balance, with an APR of 29%, that means you are spending at least $29 a year to maintain that balance, oftentimes more. Instead of using credit, make purchases with cash. If you do not have enough cash on hand, hold off until you do. Budgeting can help eliminate these concerns.
5. Find savings opportunities
Everyone can save a little money with a bit of time invested. Find unique ways to grow savings. When you do, add the money to your savings account instead of just spending it.
- Reduce your cell phone bill – call your wireless carrier to ask for a discount.
- Consider a switch from cable to lower cost subscription streaming services.
- Call utility companies (especially cable, phone, internet) and ask for savings options.
- Spend less on gifts that you give others.
- Look for savings options for eating out. While reducing how frequently you eat out will help, using coupons cuts costs, too.
6. Avoid high-interest rate cards
Many credit card offers are available even for those who have limited or no credit history. These can save you money. Avoid payday loans, high-interest credit cards, and costly private loans. They simply cannot provide you with the cost-savings you need.
7. Be consistent and include the family
Work closely with with your family to create a budget-friendly lifestyle.
Enjoy more family dinners and meals at the table by making them a positive experience. Enjoy a movie in, perhaps an older movie the kids have not seen, instead of going to the theater. Talk about savings goals, too.
Once you get your budget and savings setup, you can begin using the same method to build a fun for a trip for the whole family.
Grow Savings & Achieve Financial Security
Consistency is the key to success. By working closely with your Baltimore, MD credit union, you can grow savings and achieve more of the goals you desire.
Be sure you have a savings account ready to go to support you as you build your financial security.