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save your money tiny changes

Save Your Money With These 5 Super Tiny Changes

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According to a recent LendingClub study, 61% of the U.S. population was living paycheck to paycheck by the end of 2021, down from a peak of 65% in 2020. Even among those making six figures, 42% reported living paycheck to paycheck, according to a study of over 3,000 workers. As a result, many of those surveyed have steadily increasing credit card debts and can’t seem to find a way out of their situation.

While some may say that those high-income earners just don’t know how to budget money correctly, it may not be as easy when you’re making a low to average income. If you’re part of this group it’s extremely important for you to learn how to save your money and make the most out of your paycheck.

When you have more money coming in, it’s clearly much easier to save for an emergency fund, let alone for retirement. But how is this achievable when money is tight? If your circumstances make it difficult to save, you don’t have to move to a lower-cost area or ask your boss for a big raise in order to start putting more money aside. Let me tell you how the following five quick money saving tips will enable you to increase your savings, all while making only small changes to your financial behaviors:

1. Put Your Money Into a High-Yielding Savings Account

Simply shifting your money to a different savings account that earns higher interest rates will allow you to save your money faster and can help you achieve your savings goals. In order to accomplish that you should go for an account with a high annual percentage yield (APY).

A high-yield account is available at both online and traditional banks. These financial organizations may provide APYs ranging from 2 to 2.5%. I understand that a 2% interest rate cannot even keep up with inflation during most years. However, if you’re going to deposit money into a savings account, you may as well put it somewhere that will yield more than the national average of about 0.1%.

While this may seem like one of those super trivial money saving tips, too few people are actually following it, even though the effects can be significant: Assume you deposit $5,000 in an account with an APY of 0.1%. If you put $50 in that account every month for a year, you’ll have $5,605.33. However, if you put the same amount of money into an account with a yield of 2%, it will increase to $5,706.50. You’ll make an extra $100 each year by making this tiny change.

However, be sure to look at the restrictions carefully before deciding to deposit your funds in another bank. Do you have to make a minimum deposit, complete a certain number of transactions every month, or accept paperless statements? Check if the restrictions are acceptable to you and will not jeopardize your efforts to save your money.

2. Separate Fixed From Variable Expenses

When you have to budget money, it can be beneficial to separate your fixed from your variable expenses. Fixed expenses are those which cost the same each month, such as rent, utilities, phone and internet, as well as subscription services. Variable costs on the other hand are products and services whose costs vary from month to month, such as groceries, restaurants, cosmetics, clothes, and so on.

When you separate your fixed and variable expenses, it is much easier to automate your savings. You should calculate how much money you’ll need to pay your fixed bills and put it aside. The rest of your income is available for your variable expenses, of which part of it should be used to save your money in a high-yield savings account.

For instance, if you have $300 to spend on variable expenses like groceries, eating out, and clothes, you should put part of that $300 towards your savings. The remainder can be used for day-to-day expenses. Some personal finance experts suggest to direct at least 10% of your income in towards your nest egg. However, my thinking is that if you can deposit more, you should aim for a higher percentage.

3. Start Saving Automatically

Automating your savings is one of the best financial habits to adopt and one of the easiest to implement money saving tips in general. While some may believe that automation makes you lazy, it’s my experience that adopting the “set it and forget it” attitude is probably best for most people. Having your money automatically transferred into a savings account makes it easier to stick to set savings schedule. It also prevents you from accidentally spending the money that was actually meant to go towards your savings.

You don’t have to argue about whether you can afford to save your money, since you’ve already transferred it out of your checking account. If you realize that your initial monthly savings goal was set too ambitiously, you can always make adjustments later on. But make sure to spend your savings reduction on a cause that will benefit you financially in the future, such as paying off your student loans sooner.

4. Create a Splurge Fund

Another smart way to budget money and keep you from overspending is to set up a splurge fund. Even if you’re barely scraping by, it’s critical to have some money dedicated to enjoying life. I strongly believe that a splurge fund will even let you save your money quicker. Not only will the limited money in your splurge fund make you focus your spending on activities that actually bring you joy, but it will also prevent you from getting tired of having to endure a financially restrictive lifestyle.

Therefore, even though it may seem counterintuitive at first, spending some money on increasing your happiness is one of the most overlooked saving tips. And if you can make up the money somewhere else, let’s say by saving a little in another category or by making extra money on the side, that’s even better.

Depending on how disciplined you are with your finances in general, you can choose between two different options to budget money for your splurge fund: You can opt to track the money mentally, by keeping a tally of what you’ve spend in your head. Or you can choose to physically separate that money, either by opening an additional bank account or by having an envelope to store your dedicated cash in. Making intelligent spending decisions like these should allow you to save your money in no time.

5. Transfer Your Credit Card Balance

While the last of the five money saving tips is a little more involved than the previous ones, it can benefit you substantially if you implement it correctly. Moving your old credit card debt to one with a 0% annual percentage rate (APR), even if that low rate is limited to a few months, can drastically lower your interest fees and thereby help save your money.

The duration of that introductory rate depends on your credit card and can last anywhere from six to 21 months. During that period, you don’t need to pay any interest fees on your credit card balance. Your goal should be to pay off the remaining credit card debt in full before the introductory rate expires and you are required to pay interest fees again.

Unfortunately, however, there’s a catch: Before you decide to move your money, find out how much the balance transfer will cost you. It’s usually a percentage of your credit card balance. A smart way to budget money would be to calculate whether or not the transfer will actually be worth it, once you include the transfer fees.

Furthermore, you’ll want to know what the APR will be once the 0% introductory rate comes to an end, just in case you can’t pay off your credit card debt in full during that promotional period. If you are unable to pay off the debt in time, you may be stuck with a possibly higher APR than your previous credit card. Therefore, make sure to read the fine print before opting for the transfer, to ensure you understand what you’re agreeing to.

Final Words

When you’re loaded with debt and other financial hardships, saving might seem nearly impossible. But with the money saving tips in this article, it’s easier to budget money correctly than you may think. Little changes here and there can have a major impact on your finances in the long term and help you save your money. Be diligent when putting the described changes into practice and good luck on your way to more financial peace!