When it comes to saving more money, there are two sides to the equation – incomes and expenses. You can save more money by bringing in additional revenue. This is commonly achieved when you receive a pay raise at work, switch to a higher paying job, earn more on your investments, or create a new income stream such as a side gig or freelance work.
However, the most significant barrier to larger savings balances usually comes on the expenses side. In order to save more money, you must learn to spend less. But that’s easier said than done. Advertisers are constantly bombarding you with messages designed to make you part ways with your hard-earned money. And no matter how hard people try, everyone eventually gives in sometimes to impulse purchases.
One of the best ways to overcome temptation is to make it difficult to act upon. If you’re trying to lose weight, a successful strategy is to eliminate unhealthy foods from your home. While you could still go out and buy bad foods, they aren’t easily accessible. Instead, you have to decide to go to the store or restaurant to pick up the food. In other words, you put a barrier between you and unhealthy food.
This same strategy works wonders when trying to save money. You simply need to put a barrier between you and your ability to spend. By making your money less accessible, it’s much easier to overcome the temptation to splurge.
Ways to Make Your Money Less Accessible
Open a separate savings account
While you likely already have a savings account at your financial institution, the problem with this account is that it’s easily accessible. You can quickly transfer funds into your checking account or withdraw money through an ATM.
The trick is to open a separate savings account that you cannot readily access. Request NOT to have an ATM card tied to this account. Instead, make regular deposits and allow your balance to grow untouched.
Switch to a money market account
A money market account is similar to a savings account, but it usually requires a minimum balance to earn dividends and has limited withdrawal capabilities. You can typically make up to six withdrawals or transfers per month. As a result, you’re less likely to constantly dip into this account for frivolous spending.
Because money market accounts are somewhat restricted, you will typically earn higher dividend or interest rates from your financial institution. This is a great opportunity to save money and earn more simultaneously.
Consider a certificate account
A Share Certificate Account (or certificate of deposit) allows you to lock up your money for a designated time period, usually between one and five years. During that term, you cannot access the funds without a penalty. It’s this feature that makes certificate accounts so popular – they force you to save!
Another benefit is that certificate accounts tend to pay significantly higher dividends or interest than traditional savings or money market accounts. The downside is that you cannot add more money once the certificate is opened. Instead, you can open several certificate accounts to stagger your money, which is a great investment strategy on its own.
Put more into investments
If you currently have a portion of your paycheck automatically deposited into a retirement account, consider increasing the amount. Even a slight increase can boost your retirement savings significantly over time.
The trick is to make the increases gradual, so you can easily adjust your budget to the drop in regular income. Since retirement accounts have limited withdrawal capabilities, you know you won’t be tempted to spend those funds.
Automate your savings
The best way to ensure you save regularly is to automate the process. Payroll deduction is the ideal option for automating your savings because it’s tied to your pay schedule. Each time you receive a paycheck, the amount you designate will automatically transfer into your savings account.
Automatic transfers are a similar option. However, with automatic transfers, you choose the date for the designated transfer to occur instead of it being tied to your paycheck. Both options require minimal effort on your part once set up and are usually free at most financial institutions.
We’re Here to Help!
Finding ways to save more money can be challenging at times. By making your savings less accessible, it will be easier to overcome the temptation to spend money frivolously.
If you’re interested in exploring additional account options or would like to automate your savings, we’re ready to help. Discuss your options with an AFFCU representative by contacting us online, visiting us in-branch, or calling 410-584-7474.