One of the things that many folks want to start in the new year is better money habits. I’m pretty good about my saving, and fairly responsible in my spending. But I’ll be honest, I spend when I most definitely don’t need to. There are currently three packages on my kitchen room table of things I do not need. I fall weak to a sale deal that probably arrived in my inbox that was too tempting not to pass up. Plus as someone who is self-employed, planning for retirement is a very real and scary thing. So as many of you all probably have “save more money” or “spend less money” on your New Year resolutions list I wanted to share some tips and apps that I use to keep me in check.
My Favorite Money Saving Tips
Manage Your Debt
First and foremost, make this a priority. If you have credit card debt, make it a goal to pay this down before you start doing any other savings. If you have several cards with debt, try the laddering technique. This technique allows you to pay down all your debt and save on interest. Start by paying down your debt on the highest interest card you have. Once that balance is at zero, go to the next highest percent card and so on. If you can, pay the minimum payment required on the rest of your cards while you ladder to minimize your interest.
Remember, closing accounts is NOT good for your credit score so keep these open even if they’re at zero balance (and if you need to cut it up to keep you from using it). You can always order new ones when you’ve got your debt and spending in check.
If you never had it, you’ll never miss it! A great way to create a savings plan is to simply automate as much of it as you can. Decide on a percent that’s reasonable for your budget and set an automatic draft of those funds. Back when I was paid twice a month, I would usually do this the day my paychecks were deposited. This is the best way to do it in my opinion because you can’t miss the money if you never really had it in your wallet, right?
Since I don’t do paychecks anymore, I now do a monthly draft the same day my rent goes out. Sort of the same concept in a sense. I now just feel like my rent is a rent plus my savings automatic draft.
The same goes for saving for retirement and adding to your investments too. I also automate a percent of that automatic savings to my SEP IRA and my stock portfolio. Always be adding to your accounts monthly if you can. Even if it’s just a small amount, a little goes a long way if you start earlier and save each month. This will result in long term financial success.
Create A Budget And Follow The 50/30/20 Rule
A good starting point of creating a budget is going through your expenses and evaluating your spending habits. Put this into a spreadsheet and organize it into categories like living expenses and then meals and entertainment. Then take a look at the 50/30/20 rule. The concept of this rule is that 50% goes to your living needs, 30% to fun and 20% to savings. So the 50% of your income should go to your monthly living needs. This includes rent, groceries, insurance, health, auto, basically the bare-to-the-bone essentials to survive. 30% is designated for more fun things, going out to eat, shopping, travel. And lastly, 20% is to go straight to savings and pay off any debt.
When you have your budget created, see what % you have currently going on and see where you can make some adjustments. If you notice you’re going to Starbucks WAY too much, time to cut it back. If you realize your cable bill is taking up a good chunk of that 50% of living, time to cut back. When you have it all laid out it truly becomes reality. Or maybe you realize your car payment is out of control (a huge expense that can very easily be minimized!) and it’s time to trade it in for something more affordable. Do what you can to make sure you’re getting to 50%.
Get An Emergency Fund
Life can throw at you unexpected expenses that can easily add up quickly. One of your main savings goals (after paying off that debt!) should be to build an emergency fund. You should have ready to go in liquid cash, 6-9 months of living expenses for a rainy day. This amount should be kept in your high-yield savings account. NOT your stock portfolio. You want to be able to access this money in an absolute emergency and not have it fluctuate in the market.
6-9 months may seem like a lot, but let’s chat for real here.
What happens if you lose your job and you’re responsible for all the bills without a single paycheck coming in? Or what about if you were injured and had to take a leave of absence and you have a stack of medical bills? These are all very real scary things that can happen to anyone without a moment’s notice. Insert your emergency fund.
You should be able to live at the bare minimum off of your emergency fund for at least 6 to 9 months. You can leave out the fancy dinners and coffees when coming up with this budget, but make sure your fund will cover rent, insurance, cars, groceries and the basics. When life throws a curve ball at you, you’ll be prepared and won’t drive yourself into debt. Slowly work to get to this amount in your high yield savings account before doing anything else.
Spend Your Cash
Seems crazy but it’s true! This is especially helpful to those who tend to be impulsive shoppers or are currently in some credit card debt. Figure out your monthly budget and whatever you need for cash-related items which include groceries, household items, dining/entertaining and miscellaneous, then divide it by 4. Add this amount to your wallet each week and ONLY SPEND THE CASH. Don’t touch the credit cards. Studies have shown that you are less likely to not only break large bills but to also spend less cash when you have to physically pull said cash out.
It feels so much more real when you’re handing over dollars instead of a nice piece of plastic or just tapping your phone on a screen. This will not only help you save money as you’re less likely to spend it all, but it may also help you find where your unnecessary spending is happening.
Use The Dollar Rule
This tip is great for those of you who do use cash a lot or are using the above method currently. It’s an old savings trick that’s bound to force you to save money without even realizing it. It’s pretty simple too. All you have to do is save your one dollar bills. That’s right! At the end of every week, or you can do every day, whichever, take your dollar bills and put them into a piggy bank. Every month, deposit them into your savings account and before you know it you’ll be stacking up money left and right.
TIP – This is a great method for saving for something like a trip or special purchase. I wouldn’t bank on a retirement fund on this one, but it’s a nice way to get some extra money into your pocket without noticing. Maybe put all these dollar bills into a separate savings account that’s just for special splurges like purses, shoes or that big Europe trip you’ve been dying to take. And if you need some travel tips on how to save on that flight to Europe be sure to check out this post.
Keep Your Extra Cash In A High Yield Savings Account
Instead of keeping all your money in a low-interest rate savings account (think your traditional bank savings accounts) move them to a high yield savings account. It’s rare to find a bank that provides a large interest rate on savings, let alone anything on checking. I l like using Ally to put all my emergency funds into to take advantage of their higher interest rates. Rates vary, but right now you can get 0.5% and 0.1 to 0.25% on checking. Yes, checking! It’s a great way to add a little extra income to your money that’s just hanging out.
Invest Your Money
I know what you’re thinking. I don’t understand the stock market, I know nothing about personal finance and retirement planning, I have no idea where to start when it comes to investing. I’d rather my money just sit in a bank account to be safe.
I get it.
I don’t know a ton about investing either but insert Wealthfront. This website helps to take the guesswork out of it all. You decide how much risk you want as it walks you through a quick survey to understand your financial goals, age and more, then the financial software invests and trades stocks on your behalf. This is hands-down the BEST thing you can do for your wealth if you have money lying around. And there’s no need for a financial advisor, Wealthfront does it all for you.
Utilizing this type of service is the #1 thing I wish I did YEARS ago. Over time, your money will grow and at a much faster rate than your savings account ever can. Sure it’ll go up and down with the market. But over time it’ll no doubt be more than just sitting around. Plus, this will help you reach those financial goals like buying a house, or adding to your retirement, much quicker. And since you have that emergency fund saved up and safe in a high-yield savings account, you can wait to pull out these funds when the market is up if god forbid it crashes.
You can get $5,000 managed for free by signing up here. And no, you do not need $5,000 to start. Any amount can get you started and grow your wealth for years to come. I would encourage you to also automate this as well in addition to your regular savings. Do a monthly or quarterly draft into your investment portfolio to maximize earnings.
A few other general tips to look out for when managing your budget and cutting out unnecessary spending…
No none of these tips will magically turn you into a millionaire. But these are all smart money moves to make on the daily to ensure you’re not spending more money than you should. Also, small amounts do add up. If you’re trying to pay down a credit card, eliminating a lot of the below can help do that.
Manage any paid subscriptions
From magazines, to automatic app purchases every month, go through anything that’s a subscription and cancel anything unncessary.
Skip the expensive coffee habit.
If you must, buy a nice coffee machine and make your fancy lattes at home. It’ll pay for itself in no time. At $5 a trip just twice a week, that’s $520 a year. If you buy a $100 Nespresso machine, you’ll be saving over $400 a year.
Ask for water and skip the booze at dinner.
Even an inexpensive $8 glass of wine a week adds up to $416 a year which is your flight to Europe friends! Yes your flight, remember this post?
Switch those dinner dates to breakfast or lunch instead.
These meals are typically less expensive and you’re less tempted to order that glass of wine. This is one of my favorite tips because I personally prefer breakfast over dinner anytime and it means I’m in bed at a reasonable hour. Or swap that cocktail date for coffee (more on that here)
Cancel your gym membership and use your apartment gym or the great outdoors.
There’s tons of great apps with guided workouts now that are sure to keep you motivated.
Cut the chord and cancel cable!
There are so many affordable streaming services now that there really isn’t a HUGE need for cable if you’re not TV obsessed.
Stop getting manicures!
This is such a wasted expense and something that you can easily do at home. You can get my tips on getting a great at home manicure here and trust me, practice makes perfect. After a handful of attempts, I promise you’ll have a flawless manicure every time. I’ve had a total of 4 manicures (really polish changes) in the last 7 years. Huge savings!
Opt for store brand products over name brand.
When heading to the grocery store, this can be a big savings over time. Most of the time they’re made in the same facility and just have different packaging anyway. And if you’re a bigger family, think about how a membership to Costco or a warehouse store could help you save even more over time.
Unsubscribe from all those store emails.
The inbox temptation is 100% a thing (guilty!) and by removing these daily reminders to shop will definitely help cut out some spending. And if all those emails haven’t taught you to never buy full price, then I don’t know what will. Always use those store coupons and shop during sales!
Favorite Money Saving Apps & Websites
While saving money usually includes not going out to eat, it’s a habit I just can’t seem to break. Insert Seated which is a great app to make it at least less expensive. Make reservations during off hours at some of your favorite restaurants and after 24 hours you’ll receive anywhere from a $10-$25 reward to use at Amazon, Uber or Starbucks. I know it sounds too good to be true, but it’s true. I’ve used it at countless of my favorite restaurants, and honestly, the “off hours” aren’t that off. Use this link or code jessica560 to get an extra $5 off your first meal.
If you’re anything like me, you LOVE Target. I shop there at least once a week so using the Cartwheel app helps in savings. I go through my shopping list and then head to the app to see if anything is on sale. Sometimes you can find some great deals and all you do is check it off in the app and scan it at checkout. Plus, you earn rewards while you shop. It’s pennies really, but it can add up!
This is the company I use for my high-yield savings account. I keep my emergency fund in here so that it can earn more on interest than a traditional bank savings account like my Wells Fargo bank offers.
There’s a few apps similar to Acorns but the general concept is saving and investing your spare change. If you don’t save at all, this is a great way to get started. This app rounds your transactions on your linked credit cards to the next dollar. It then takes the spare change and puts it into an investment portfolio. This is a great way to get into savings without you really noticing it. You can also get a free $5 to start investing today with my unique link here.
In addition to rounding up your transactions, they also have retailers that offer incentives to increase your portfolio balance. Shop at Zappos or Macy’s? Booking an Airbnb? They’ll add either a flat fee or percent of your transaction to your Acorns account to invest.
I’ve been using Wealthfront for a few years now and absolutely love it. It’s where I keep my SEP IRA (I’m self-employed so this is my retirement fund) and it also has my ROTH IRA which I rolled over from a previous employer. In addition to managing those retirement funds, it’s also where I have my investment portfolio. That sounds a lot scarier and impressive than it is. But it’s super easy, and that’s why I love Wealthfront.
Wave or Mint
Although WAVE and Mint do not help you save money, these types of budgeting and tracking websites/apps help to keep yourself organized and get the big picture of your financial standing. Which in my opinion is just as important as actually saving. Depending on how much you want to view or control, it’s all here.