Chances are you’ve heard many times how important it is to have savings in case of emergency. But, unfortunately, not all of us have a rainy day fund to cover small emergencies, let alone bigger expenses, such as homeownership and a mortgage down payment.
Earlier this year, CNN covered a new report from Bankrate, which found that nearly six in 10 Americans don’t have enough money in their savings to cover unexpected expenses of even $500 to $1,000.
Luckily, it’s never too late to start saving! Here are 10 tips to help you save $10,000 in one year:
- Start a Budget: If you don’t already have a household budget, it’s time to start one. Knowing exactly what money is coming in and going out each month will empower you to make better informed financial decisions.
- Trim the Fat: Take a hard look at your expenses and see where you can trim any fat. If you regularly buy coffee three times a week, can you cut that down? Finding areas where you can even save even a couple of dollars will start to add up month over month. Even just trimming $50 in expenses each month will add up to $600 in a year.
- Open a New Bank Account: It may seem counterintuitive, but a lot of banks offer a “bonus” of anywhere from $150 to $500 for choosing them. Open the account, but then only use it to deposit your savings, so you’re not tempted to spend it. Be sure to read the fine print though because there may be some terms and conditions to receive the bonus.
- Make it Automatic: Check with your HR department if you can split your paycheck to direct deposit into two accounts. If so, have a set amount go directly into savings and the rest into your checking. At first, it might seem like you have less money, but eventually, you won’t even notice because that money is being saved before you even see it. If you transfer $100 per paycheck, that’s $2,600 you’ll save over 12 months!
- Pay with Cash: About 60 percent of all payments made in the U.S. are non-cash methods, such as debit and credit; however, research continues to showing that paying cash saves us money. Research shows people tend to spend 15 to 20 percent less when they’re thinking of parting with physical money.
- Bank Savings Incentives: A lot of banks now offer saving incentives to help you save without even thinking about it. Some banks offer a “Keep the Change” program that rounds up each debit purchase to the nearest dollar and automatically deposits it into your savings account. Those pennies, nickels, and dimes add up so ask your bank if they have a program.
- Make it a Game: Try looking at saving as a challenge you get to participate in versus something you have to do. For instance, pick a few months each year to do a 30-day challenge—only have “staycation” dates in for a month, or only cook at home for a month. In 2015, the average American spent $250 a month eating out.
- Spring Clean: If you haven’t done a deep clean of your house in a while, now’s the time to do so. But instead of tossing or donating items, this time try to make a few extra dollars off of them. Yard sales, eBay, consignment shops and more make it easy to purge your extra clutter and make some money.
- Ask for a Discount: If you’ve been paying your bills automatically and haven’t reviewed your plans for a while, revisit them to see if you can get a better rate. And don’t be afraid to ask for a discount! Some companies may give you a loyalty discount or offer a better plan. If they don’t maybe it’s time to switch. Calling around to see if you can get a better rate on car insurance, for instance, could save you $50 a month.
- Cool It on the AC: Additionally, you can look for small ways to save around your house. For instance, turn lights off more often, don’t let water run, or adjust your heating and cooling a few degrees. Most people think keeping their heat or AC at the same temperature is more energy efficient, but programming it or only turning it on when you need it and keeping it a little warmer in the summer or cooler in the winter could save you 10 percent or more on your energy costs.
As you can see, every little bit can add up quickly and any money that you’re able to save and put toward your mortgage down payment will make a big difference when it comes to your overall costs on your journey to homeownership.
Example Savings Plan:
- Cut cable: $103 x 12 months = $1,236
- Cut gym membership: $50 x 12 months = $600
- Make Coffee at Home: $2.70 x 52 weeks = $140.40
- New Bank Account: $200
- Automatic Transfer: $100 x 24 paychecks = $2,400
- Pay With Cash: 20% saving on $200 x 12 month = $480
- Roundup Change: $10 x 12 months = $120
- Cook at Home: $250 x 6 months = $1,500
- Spring Cleaning: $500 ● Switch Car Insurance: $50 x 12 months = $600
- Energy Efficiency: $200 x 12 months = $2,400
Total Potential Savings: $10,176.40
Now that you have a good understanding of how to save money go find out how much you can afford!