2016 Money Resolutions: Building Your Savings
January 7, 2016
Eileen L., Financial Expert
January is a great time to start building new habits to make 2016 the best year yet. A lot of people make New Year’s resolutions about money. Today and next Thursday I’ll be talking about the two most common money resolutions: saving money and reducing debt.
Why Do Savings Matter?
It’s definitely more fun to spend the money you earn than to save it. Sushi with your friends, having the newest phone, and going on vacation all cost money. But, having a healthy savings account actually makes doing fun things easier.
When you have savings, you can buy those plane tickets when you find a great deal, not just the day you get paid. You can pay for emergency car repairs and still be able to buy groceries or go out to dinner with your friends. If you drop your phone—we’ve all done it—you won’t have to reach for your credit card and pay interest.
Depending on your finances, you might be able to save $2 a month or $200 (or even more) a month. All saving is good saving! Maybe the 52-Week Savings Challenge will work for you. There are tons of great ideas on Pinterest for savings challenges and goals. Some people save every $5 bill they ever get. If you buy coffee every day, try brewing coffee at home. Then, move the money you save into your savings account. I’ve also tried no-spend days, weeks, and even months! You can save a ton of money and it also helps you see the things you can cut from your budget.
I like to combine savings challenges with specific savings goals. If you’ve been following the blog, you know I’m saving to pay off my car. So, that’s my main savings goal for this year. I set up a 1-Year Add-On Certificate named “Car Savings” to remind me of my goal. This week I'm putting $52 in it for week 1 of the 52-Week Savings Challenge. I also have a sub-savings account called “Vacation.” You can have up to 10 sub-savings accounts in your MSUFCU account. That’s 10 potential savings goals (not including any Certificates). I'm only focusing on my car, vacation, and emergency funds this year so it's not overwhelming.
You’ve set your goals and figured out a plan you think might work for you. What now? Time to increase your savings potential and automate.
Cutting Your Expenses
If you have more savings goals than wiggle room in your current budget, there are only two ways to up your savings. Cut expenses or create income. Stay tuned for a post about creating more income (especially when you're spring cleaning)!
Cutting your expenses is daunting. One of your biggest expenses, housing, might not be negotiable. But there are smaller ways to save money that add up. If you have credit cards, call and see if you are eligible for a lower interest rate. Do you stream movies or shows more than you watch cable? Maybe it's time to cut the cord. Or maybe commit to cooking at home every night except for Fridays (or Saturdays, or Tuesdays).
It'll take time to figure out what you can live without and what habits help you save money. Don't be afraid to try different things if one cost-cutting idea doesn't work for you.
Automate Your Savings
To help me hit my goals with the least work, I automate my savings. I have an automatic transfer set up every payday from my checking account to my savings accounts. Once the money is safely tucked away, I don't even think about it.
You can set up transfers any way you want in ComputerLine or the mobile app. Monthly, biweekly, even weekly. Plus, while your automatic transfers are humming along in the background, you can still make manual transfers. Get an extra $100 from selling a painting your aunt gave you for your wedding? Bonus savings! Transfer that money into a sub-savings account or Certificate and reach your goals even faster.
It’s Okay to Spend Your Savings
The point of savings is to have them when you need them. And you're the best person to decide when it's best to use the money you've saved. It's good to have a buffer in case of emergencies, but most of my savings goals have specific end dates in mind. I'm going to use all my vacation savings when I go on vacation. You might be saving for a down payment. Part of the fun of saving is thinking about the things you can do with your money.
Savings are also essential in emergencies, which is why I'm committing to increasing my emergency fund this year. This won't be for a certain goal, but just to make sure I have money when I need it. 63% of people don’t have enough money saved to cover a $500 emergency. In 2016, I'm going to work on having 3 months of living expenses in my emergency fund.
Leave a comment with the creative ways you’re saving money this year and your 2016 savings goals!