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We all have our goals for 2021. For some of us, it's to eat healthy and exercise four days a week. For others, it's to see our savings accounts grow. If you fall into the latter camp, here's a five-step plan for pulling it off.
Step 1: Map out a budget
Having a budget makes it easier to track your spending and understand where your money actually goes month after month. To set up a budget, go through your bank and credit card statements from the past year and see what your various bills have cost you. Then, with the help of a spreadsheet or budgeting app, list your costs and compare your total monthly spending to what you bring home in your paychecks. From there, you'll get a better handle on your money, which paves the way to saving more.
Step 2: Identify one significant expense to cut back on
If you cut down on every single bill in your budget, you'd have an easy time saving more. But how realistic is that? A better idea is to pick one large expense to trim, whether it's your rent (if you can move affordably, and that less-expensive housing is available), your car (if you can switch easily to public transportation or a cheaper vehicle), or dining out three nights a week. Cutting back on just one substantial expense can give your savings a nice boost without completely upending your life.
Step 3: Trim or eliminate a few smaller expenses
There are probably expenses in your budget you can reduce without feeling the pain too badly. For example, if you're paying $9 a month for a music streaming service you rarely use, cutting that out could help your savings grow. Granted, that won't have the same impact as downsizing from an apartment that costs $1,200 a month to one that costs $950, but every little bit helps.
Step 4: Automate your savings
Once you've identified some budget cuts, make sure you don't spend that money elsewhere. To this end, automating your savings can help. If you arrange to have a portion of your paycheck move automatically from your checking account to a savings account every month, you can eliminate the temptation to spend your newly freed-up cash.
Step 5: Boost your income with a side gig
Changing your spending habits can go a long way toward growing your savings. But if you want to potentially double that effort, find a gig you can do on top of your main job. These days, there's a ton of side-hustle work that can be done remotely or in a contact-free fashion in the COVID-19 world. You can edit or write content from home, design websites, do data entry, become a telemarketer, walk dogs, or serve as a virtual tutor. Since your earnings from that gig won't be earmarked for existing bills, you can bank all of that added income (aside from what you owe the IRS).
Boosting your savings in 2021 is a noble goal -- and a doable one with the right approach. Follow these tips, and with any luck, you'll be sitting on a nice pile of cash by the time next year comes to a close.