The economy is improving, the real estate market is on the mend and the labor market is showing some positive signs, so now is the perfect time to re-evaluate (or create) a savings a plan.
For many cash-strapped consumers, increasing savings isn’t a top priority, but even the smallest amount can have a great impact on future financial health.
“No matter what, put something away each month,” says Paul Gentile, executive vice president, strategic communications and engagement at the Credit Union National Association. “Do it automatically and forget about it. Then one day you’ll wake up and be surprised by how much you have.”
Young and middle-aged workers face a very different financial reality when it comes to retirement than previous generations. Defined pension plans are a thing of the past and the fate of Social Security benefits is still unclear, all of which places more of the financial burden on the individual.
The first step to saving is creating a plan. Curt Knotick, chief executive of Accurate Solutions Group, suggests tracking every time you spend money--whether it’s on lunch, rent, coffee or utilities--for 30 days and then reviewing the expenditures against your income. This will help identify any unnecessary spending and provide a clear picture of your financial state.
“Once you start living on a budget and get an idea of where the money goes, you can begin directing it into certain areas,” he says.
It might not seem like much, but putting away $15 a month is better than nothing. However, there are tricks to increase the amount you save without feeling it. For instance, pledge a percentage of any raise you get to automatically go into savings. Experts often advise living off of 90% of what you earn and saving 10%. This rule should also apply to any salary raises or bonuses. If you get a 3% cost of salary raise put 1% of that into savings.
Refinancing your mortgage can also help bolster savings. Now is an ideal time to refinance since the rates are so low. According to Gentile, the average rate consumers are paying on their mortgages is still around 7%, but rates have been sitting below 4% for more than one year. The money saved with a lower rate should go directly into savings. Gentile also suggests trying to get a lower interest rate on your car loan and applying the difference to savings. “We are seeing lending opening up a little bit more.”
We all rely on our smartphones and other devices to communicate, but they don’t come cheap. Smartphones require data plans that come with a hefty monthly bill; it’s not uncommon for people to pay $150 or more each month for mobile devices. Gentile says a simple phone call to your telecom provider could yield a reduction in your bill. “More often than not, you’ll get off the phone with your carrier with a cheaper plan because they don’t want you to turn to another provider,” says Gentile. “I’ve done that myself and got $40 off a $190 a month bill.”
That same strategy can also apply to your homeowners and auto insurance. Financial experts say it’s a good idea to shop around each year to see if you can get a better deal and to check with your insurance providers to ensure you are getting all the discounts you deserve.
Once you figure out how much you can save each month, set it up so that you save the money automatically. Either have it withdrawn directly from your pay check or bank account. “If you have to write a check it’s not going to happen,” says Knotick.