Setting a high savings rate may be one of the most important financial choices you can make. If you would like to invest in property, provide for your children’s future, or retire early, having a high savings rate allows you to build wealth and increase your monthly savings.
What Is Your Savings Rate?
Before you can determine how to increase your savings rate, you need to calculate your current rate and aim for improvement. To calculate your savings rate:
- Divide the amount you put into savings each month by your monthly gross income.
- Multiply the result by 100 to get a percentage.
Most people set aside a small amount of whatever they have left after paying monthly expenses and bills. However, taking this approach does not allow you to proactively choose your savings rate to meet your financial goals. To see your savings rate increase, you need to reverse your thinking. You should first determine your desired savings rate, and then budget the money you have left to pay expenses and bills.
To start saving more you may need to rethink some of your other spending habits. You will have to examine how much you spend each month and where you can cut expenses to meet your targeted savings goals. To help you accomplish this, here are some great money-saving tips and tricks.
1. Get rid of cable or satellite TV.
Look at how much you could save by just eliminating this single monthly bill. Sign up for a subscription streaming service or just purchase digital downloads of your favorite movies and TV programs. Putting aside $60 to $150 a month by saving money on entertainment products and services will drastically raise your savings rate.
2. Cancel monthly meal box services.
Subscription boxes and pre-made meal delivery services can put a big dent in your food budget. Do you really need meals delivered to your door? In most cases you could save more money by using pick-up or delivery options from the grocery store and shopping their sale prices. Take a look at all of your subscription boxes and food services and cancel any you can live without to free up more money for your savings accounts.
3. Automate your savings deposits.
It is important to pay yourself before you pay your bills. Once you determine the ideal savings rate to reach your retirement savings or other personal finance goals, you can automate savings deposits, either with direct deposits from your paycheck or automated transfers from your checking account each pay period.
4. Ask for a raise or a promotion.
One of the best ways to set aside more money for your long-term goals is to make more money now. If you haven’t been given a raise in quite some time, ask your employer for one. If you’ve just received a good performance review, ask about moving up to a higher paying position in your department. Your employer might think you are happy at your current pay rate and position since you haven’t asked for a pay increase or promotion.
5. Look for new income opportunities.
To increase your available income in the short term without reducing your lifestyle you might want to look for a side hustle. Some examples of ways to make more saveable income include:
- Working an easy part time job
- Doing some childcare or lawn care for friends and neighbors
- Becoming a rideshare driver
6. Max out employer matches on retirement programs.
If you aren’t putting in the maximum amount your employer will match on 401k and other retirement programs at work, you might be throwing away free retirement income. Employer contributions count toward your calculated savings rate, so if your current budget does not allow you to max out these programs, your savings rate is probably too low. It might be time to reevaluate your options or even meet with a certified financial planner.
7. Get rid of high interest debt
If you have credit cards or store financing at rates higher than 7 to 8%, there is a good chance you can refinance these debts with your credit union. The higher the interest rate on a loan you hold, the faster and longer it will consume the income you want and need to save, so make these payoffs or refinancing a priority in your financial planning. Car loans and student loans are usually at a much lower rate and can continue to be part of your sound savings budget.
6. Downgrade your smartphone plan.
Your cell phone bill might be much higher than it needs to be. If you live in an area with good coverage, check out your options to cut this bill in half or more. With the number of free Wi-Fi hotspots these days, you may not need unlimited data and can step down to a lower plan.
7. Keep your car, smartphone, and other devices longer.
It can be tempting to have the latest model car, newest smartphone, and other new devices. Yet, the longer you can keep what you have, the less money you have going out each month. If your financial plan includes being wealthy in the future, you will need to resist the temptation to spend money now on appearances and keep using those functional assets as long as they are functional.
8. Use discounts, coupons, and savings offers.
Maximize how far your money will go with discount offers, coupons, and savings offers. You can find great deals like cashback rewards on your debit card purchases, stacking coupons with buy-one-get-one-free offers, and more. Looking for and using discounts is a way to keep living your current lifestyle while you save more.
Learn Better Ways to Save at TPFCU Today
When you make the importance of increasing your savings rate a priority, you will notice your savings grow much faster. The faster your savings grow, the more opportunities you have to invest them into retirement accounts and other investments to grow your money even more. Helping you achieve financial security now and in the future is our mission at TPFCU.
To open a savings account, CD, or IRA, and for other products and services to help you save more money, visit your nearest TPFCU—The People’s Federal Credit Union branch—in Amarillo, Childress, or Canyon, Texas. You may also contact us at (806) 359-8571 to find out more about calculating and raising your savings rate today.
