Published in: Banks | Sept. 19, 2019
Your Savings Might Suffer if You Don't Do These 3 Things
By: Maurie Backman
Don’t let your savings fall by the wayside.
We all need money in savings, and if you don’t make an effort to accumulate some cash reserves, you’ll be in real trouble when emergencies arise. And although you may have every intention of saving money, your chances of success are limited if you fail to do these important things.
1. Follow a budget
The beauty of budgeting is that it gives you insight into where your money actually goes month after month. But if you don’t follow a budget, you could wind up missing out on key savings opportunities.
For example, you might think you only spend $300 a month on entertainment and dining out. But if you actually spend closer to $400 a month, then that’s $100 you’re not adding to your savings because you don’t even realize why it’s going missing. A better bet, therefore, is to set up a budget and stick to it. Doing so involves listing your recurring monthly expenses, factoring in once-a-year expenses for which you should set aside funds every month, and comparing your total spending to your earnings.
Now, you may have to make some changes if you create that budget and find that there’s little to no room left over for savings once your expenses are accounted for. But in that case, you’ll have your spending mapped out for you, and it’ll be easy to see where you need to cut corners.
2. Avoid impulse purchases
Steering clear of unplanned purchases is easier said than done, but if you don’t make an effort not to buy things on a whim, your savings could take a serious hit. In a recent study by The Ascent, 42% of respondents said they regularly waste money on impulse buys. But a few tweaks on your part could help you avoid them.
For one thing, don’t shop for fun; only hit the stores when there’s a specific item you’re looking to buy. Additionally, if you don’t trust yourself to avoid impulse purchases, leave your credit cards at home, and shop with cash alone. If you only stick enough money in your wallet to cover the items you know you’re after, you’ll take unplanned buying off the table. Additionally, force yourself to wait a full 24 hours before completing an impulse buy. That will generally give you enough time to come to your senses and realize that the item in question isn’t a need (or even a compelling enough "want").
Finally, don’t be lured by the word sale. That’s generally just code for "let’s take this overpriced item and mark it down to what it should cost in the first place." And again, if the item you’re looking at is something you don’t actually need, then buying it can ruin your savings efforts.
3. Pay your credit card bills in full
When you don’t pay your credit card bills in full by the time they come due, you’re immediately penalized in the form of interest on your outstanding balance. Accrue too much interest, and it’ll eat up a large chunk of your earnings until your balance is paid in full. And the more money you throw out on interest, the less you can put into savings.
The solution? Keep tabs on your credit card balance, know how much you can afford to pay off by the time your billing cycle ends, and pledge to keep your charges at or below that limit. And if you don’t trust yourself to follow that rule, you know what to do -- stop using credit cards, and keep yours around for emergencies only.
Sometimes, all it takes is a little mindset adjustment to improve on the savings front. Stick to a budget, stay away from impulse buys, and avoid credit card interest so that your savings don’t suffer needlessly.
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