Many of us made money-related New Year’s resolutions. Have you been keeping yours? At Omni, we understand that changing spending and saving behaviors can be challenging. But by adopting a few smart habits, you can begin growing your savings and working toward your financial goals. Here are five simple steps that can help you get started.
There’s no secret to saving more money. By adopting these five simple and smart habits, you can start growing your savings and working toward your financial goals.
- Pay yourself first
Financial experts say that one key habit smart savers follow is that they pay themselves first. Before paying your rent or mortgage, utilities, or any other necessities, put a portion of your paycheck into an interest-bearing savings account. In time, you will learn how to live on less while you build your savings.
Putting money in a savings account is an important way to prepare for that “rainy day” or save for a goal. You can even set up different savings accounts earmarked for different purposes, such as emergencies, travel, a new car, etc. More savings means you’ll have easily accessible money on hand to pay for unexpected expenses or big-ticket items and services – and you’ll have less need to turn to credit cards.
- Automate savings
The easiest way to pay yourself first is to set up an automatic savings plan. This type of plan automatically transfers a fixed amount of money from your checking account to a savings account every time period of your choice (weekly, bi-weekly, monthly, etc.). It is a great strategy for saving consistently. Plus, you’ll earn some interest. Read more about how an automatic savings plan can help you reach your goals.
- Minimize credit card use
Debt has its place. A mortgage, for example, allows people to purchase homes. Otherwise, most individuals would not have enough cash to buy a home outright. The same can be said about auto loans which allow people to pay off a new or used car over time. Transportation is a necessity for most people, so a loan can be useful.
Credit cards, however, can be a dangerous form a debt if not used correctly. If the balance is not paid in full when the bill comes due, interest is tacked on. This can put the credit card user in a cycle of revolving debt. While credit cards can come in handy for emergency situations, all too often people use them to pay for discretionary items.
If you have credit cards, make a habit to leave them at home when you shop. Purchase items with cash and save your credit cards for emergencies only. Using cash helps force you to live within your means, unlike credit cards which allow you to buy things you may not be able to afford at the present time.
- Pay more than the minimum on credit cards
According to recent stats published by ValuePenguin, 41.2% of all households carry credit card debt. If your household falls into that category, pay more than the minimum each month. Depending on your balance and interest rate, paying just the minimum could keep you in debt for years and could cost you thousands of dollars in interest.
Getting into the habit of paying as much as you can toward your credit cards will help you save money on interest, eliminate your debt faster and may give your credit score a boost. But as you’re paying down your cards, keep in mind step 2 – use your credit cards sparingly or, better yet, not at all.
Consider debt consolidation
If you have multiple high-interest credit cards that are carrying high balances, you may want to consider debt consolidation. With a debt consolidation loan, you’ll receive funds that may allow you to pay back all your credit cards. So instead of having several credit card due dates and minimum payment requirements, you’ll have just one debt consolidation loan to pay back.
Plus, debt consolidation loans are installment loans. They have a fixed interest rate, a minimum monthly payment and set term (e.g., 12 months, 18 months, etc.). As long as you submit your required payment on time each month, you will be able to pay back your debt consolidation loan within that time period.
- Spend Less than You Earn
No matter what your income, a good rule of thumb to follow is to spend less than you earn. That ties into tip #1, pay yourself first, but it also means being mindful of how you are using your money every month. Avoid impulse buying, reduce utility consumption where possible, shop around for cheaper rates on insurance, cut back on going to restaurants and expensive entertainment, etc.
And what can you do with your surplus money? Here are a few ideas:
- Build your emergency savings account
- Contribute to your retirement fund
- Pay down debt
- Add to your child’s college savings
- Save up for a long-term goal
- Open a CD to keep your money safe and earning interest
Consistently spending less than you earn may seem difficult at first but it is a necessary habit that can help you achieve your financial objectives.
No matter what your income, a good rule of financial thumb to follow is to spend less than you earn.
Good luck and don’t get discouraged! Once you establish new savings habits and they become a part of your life, you’ll be able to reap all the financial rewards.
The information provided in this blog post is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial professional to determine what may be best for your individual needs.