Is your New Year’s Resolution for 2021 to save more money?
The start of a new year is the perfect time to reassess your finances and make a plan to save more money. Check out these tips to increase your savings in 2021!
Build an emergency fund
This is a crucial tool for financial security.
Your emergency fund should be specifically earmarked for emergency situations, such as an ER visit or car repairs. It can also be used to cover expenses if you unexpectedly lose your job. For this reason, it is suggested to keep 3-6 months of expenses in your emergency fund.
Having an emergency fund prevents you from having to use high-interest credit cards or loans in the event of an emergency or job loss, which can end up costing you a lot more in the end. It will also keep you from dipping into money that you may have saved for other goals, such as retirement or buying a house.
Utilize a high yield savings account
When opening a savings account, be sure to check the Annual Percentage Yield (APY). APY is the amount of money an account earns in a year, including compound interest. Many savings accounts have very low APYs, meaning you could earn as little as a few pennies in your savings account over the course of a year. Other banks – particularly online-only banks – have higher APYs, allowing you to earn more on your savings account and, in turn, helping you reach your financial goals quicker.
Set up automatic transfers
Some banks give you the option to automatically transfer money from your checking account to your savings account (or any other account). This is an easy way to avoid the temptation to spend any extra cash you may have in checking. Just be careful not to transfer money that you don’t have or you may be charged a fee!
Create a budget (and stick to it!)
Creating a budget is one of the simplest ways to make sure you achieve your savings goals. All you have to do is figure out how much money you’d like to save each month and build the rest of your budget around that number.
Apps like Mint not only help you set up a monthly budget, but also have features that track your financial goals. It’s a convenient way to monitor both your spending and your savings at once.
Start a side hustle
One of the most crucial ways to grow your savings is to increase your income. If you find yourself with some free time, a side hustle can help you achieve this. Here are some examples of side hustles that can earn you money in your spare time:
- Becoming a driver for Uber, Lyft, or other ride-sharing service
- Becoming a delivery driver for a company such as Doordash or Grubhub
- Creating crafts or art and selling them on a website such as Etsy
- Sell professional services on Fiverr or Upwork
- Tutor online or in-person
Earn credit card points (but be careful!)
Credit card points can be a great way to earn extra cash – or rather, cash back – as long as you are careful. Be sure to pay off your credit card in full each month. Using a credit card to gain points only works if you are not also paying interest on your credit card payments. Otherwise, you are losing money!
Take advantage of your employer’s 401k match
Many people are enrolled in their job’s 401k without knowing all of the details of their contributions. Find out if your 401k offers an employer match, and if so, be sure to max out that match. Otherwise, you are missing out on bonus money for your retirement!
To get full clarification on your company’s 401k match, be sure to contact your HR department.