The average American has about $65,000 in savings, according to a recent poll. But if that’s the average, that means that a great number of people have much less; maybe more in the neighborhood of a few thousand or even less than that. The recent pandemic certainly wreaked havoc with people’s savings, of course. But even before COVID broke out, many individuals and families in the U.S. have struggled to save money.
How to save money isn’t always taught at home, and it certainly isn’t included in most school curriculums. Unfortunately, many people learn late in life, and for some it may feel like it’s too late to do anything about it. Yet, saving money is essential for financial security. Just know that it’s never too late to start saving. The key is to save smarter and better. How you save can make a significant difference in achieving your financial goals.
Understand Financial Goals
When it comes to saving, there are two kinds of financial goals to consider; short-term and long-term.
Short-term goals are the ones to meet your needs immediately or in the near future. Examples include things like a replacement kitchen appliance, building an emergency fund, a deposit on a rental home, or something you want but don’t need, like a spa weekend, a cruise or something similar.
Long-term goals are ones to improve your financial security down the road. Examples include building a retirement fund, paying for your toddler’s college education, buying a house, and similar things.
Generally speaking, short-term financial goals require less money than long-term goals.
So, your first step is to create those two lists of your short and long-term financial goals. Your CPA can work with you on these lists, if you need help. By clearly defining these goals, you can tailor your savings strategies to meet specific timelines and requirements, ensuring that you're on the right track to achieving what matters most to you.
Clever Ways to Save
Your next step is to find ways to cut costs so you have money to save. Here are some clever ideas for saving money:
Leverage Cashback and Rewards Programs
Many credit cards and loyalty programs offer cashback and rewards for everyday purchases. By strategically using these cards for groceries, gas, and other regular expenses, you can earn points or cashback that can be redeemed for gift cards, travel, or even cash. It's like getting a discount on every purchase without having to clip coupons. Just be sure to pay off the balance each month to avoid interest charges, and you'll be saving money effortlessly.
Shop with a List and Stick to It
Impulse buying can quickly derail even the best-intentioned savings plan. One clever way to avoid this pitfall is to shop with a list and commit to sticking to it. Whether you're grocery shopping or buying clothing, having a list helps you focus on what you need rather than what catches your eye. This disciplined approach can lead to significant savings over time without feeling like you're depriving yourself.
Embrace the Sharing Economy
The sharing economy offers numerous opportunities to save money. From ride-sharing to tool-sharing, you can access goods and services without the full cost of ownership. Consider carpooling to work or using a bike-sharing program for short trips around town. If you need a power tool for a one-time project, look for local tool-sharing libraries or community groups. These shared resources can provide what you need at a fraction of the cost, allowing you to save money without sacrificing convenience or quality.
Buy Generic or Store Brands
Brand loyalty can be expensive. Often, generic or store-brand products are just as good as their name-brand counterparts but come at a significantly lower price. Whether it's over-the-counter medications, pantry staples, or household cleaning products, opting for generic or store brands can lead to substantial savings. Experiment with different products to find the ones that meet your standards, and watch your savings grow.
Take Advantage of Seasonal Sales and Clearance
Timing your purchases to coincide with seasonal sales or clearance events can lead to big savings. Whether it's buying winter clothing at the end of the season or shopping for holiday decorations after the holidays, being patient and strategic with your timing can pay off. Keep an eye on sales cycles and plan your purchases accordingly. You'll get the same quality products at a fraction of the price, allowing you to save money without compromising on what you want.
DIY Where Possible
Do-it-yourself (DIY) projects aren't just for craft enthusiasts. From home repairs to beauty treatments, taking a DIY approach can save you money. There are countless online tutorials and resources to help you learn new skills, whether it's fixing a leaky faucet or making your own cleaning products. Embracing a DIY mindset not only saves money but also provides a sense of accomplishment and creativity.
Put Real Money in Savings Account
The next important step is to actually make sure to put real money in your savings account. That thing where you go to a store and the clerk happily tells you that you “saved” a certain amount of money is practically useless. Unless you’re making deposits into a savings account, you won’t have savings.
Automate Savings
Automating your savings takes the effort out of manually transferring funds and ensures consistent saving. By setting up automatic transfers to your savings or investment accounts, you create a "set it and forget it" system that aligns with your financial goals.
Money Management Apps
Modern technology offers various apps and tools to help you manage your money. From tracking spending to setting budget goals and reminders, these tools provide insights and convenience. Explore different apps to find one that fits your needs and preferences, making the process of saving smarter and better more accessible and enjoyable.
Saving smarter and better requires a multifaceted approach that requires understanding, planning, and continuous effort. By focusing on individual needs, utilizing the right tools, and applying practical strategies, you can build a robust financial foundation. The journey to financial security is within reach, and with the right guidance and commitment, you can achieve your financial dreams. Contact your CPA to learn more.
- by Kate Supino -