Back to Basics: Savings Tips
I hope you’ve enjoyed my recent ‘Back to Basics’ blogs. To recap, in light of all that’s happened with COVID-19 in 2020, now more than ever may be the best time to get back to basics with finances. Check out my banking tips post here and my cost-cutting post here. This week we’re covering savings — probably my favorite topic of all!
Choose a Tangible Method
There are so many methods for savings that make it easy to form a positive habit. There’s the Dave Ramsey Envelope System, the 52 Week Savings Challenge, or even the tried and true method of setting aside a dedicated amount each month. No one approach is better than another, it just depends what works the best for your family and income! My suggestion is to do your research and start with what feels the most digestible. Just like any change, savings requires discipline, so having a tangible approach is key.
Living Off of One Income
One of the ways I encourage people to plan for an upcoming big life change that affects income, such as maternity leave, a move to a new city, or starting a new business, is to practice living off of one income ahead of time. Granted, this only works if you have the time to prepare. For example, if you are moving to accommodate a job opportunity for your spouse in four months and don’t plan to seek a job right away so you can manage the transition, use those four months to practice living on one income. Cut where you can and see how much you can set aside. This same method works for people who don’t have an upcoming life change, but have committed to paying off debt and growing savings.
Label Your Effort
One of the best ways to stay on track with any goal is to name it and keep it front and center in your busy day-to-day life. Many financial institutions offer this customization through online accounts. Therefore, every time you log into mobile and online banking you will see ‘Smith Family Savings’ instead of Account 123. Every time you make a funds transfer, it will be to ‘Smith Family Savings.’ Capture your goal, write it down, and put it in every conceivable place. Post it to the refrigerator, in your car, in your office — you get the idea. It's pretty simple and will mentally prompt you to keep up the hard work until you reach your goal.
Savings is one of the most important tenants of personal finance, and for good reason. Having an emergency fund or nest egg in place gives you options. The option to pay off that unexpected surgery, to avoid panic when someone loses a job, to start that business without the immediate pressure of income replacement. We never know where life will take us, but we do know that having options is always better than not. I hope these tips help you on your savings journey.
Kat’s Money Corner is posted in the Kansas City Star every week. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, follow us on Twitter @CommunityAmerCU.