It also happens to be great advice for anyone looking to save more money. Here’s a checklist of what you need to do.
Check Out your Checking Account
You probably use your checking account more than any other financial account, but you might also maybe paying more for it than you should. The average monthly fee for a checking account at a brick-and-mortar bank account was $7 in 2018, according to WalletHub. That’s $84 a year and doesn’t count the out-of-network ATM and overdraft fees that many banks also charge.
But most checking account fees are avoidable. If you’re paying a monthly service fee for checking, consider switching to another bank or a credit union, such as an online-only bank, that offers free checking. Be sure to choose a bank or a credit union with an ATM network that’s convenient to you (or one that rebates ATM fees.)
The trick to avoiding overdraft fees is to make sure that you don’t spend more money than you have in the bank. “I always encourage folks to balance their account,” says Cynthia Meyer, a Certified Financial Planner with Financial Finesse. If you haven’t done that in say, a decade, there are workarounds. “You don’t have to balance to every penny, but round everything to the nearest dollar or nearest $5. And pretend you have $100 less than you do.” Opting out of overdraft protection is another smart move.
Shop Around for a Savings Account
After nearly a decade of savings accounts offering almost no interest, rates are finally on the rise, especially at online-only banks, regional banks and credit unions. If you’re earning less than 1% interest on your savings, shopping around for a new bank could more than double your rate of return. You might even consider putting some of your short-term savings into a money market account, which could offer even a better rate.
Set Your Savings on Autopilot
The goal, of course, is to not only to have a savings account, but also to make sure that you’re contributing it to a regular basis. The easiest way to do this is to take advantage of the option offered by many companies called “paycheck splitting,” which basically means having your paycheck direct deposited into more than one account.
Figure out what percentage you want to go into savings (after you’ve made your retirement account contribution), and set it up to go there automatically. If your employer doesn’t offer that option, or if you work for yourself, you can set your own automatic transfers from your checking account to your savings account.
Having the money physically gone from the checking account will make it easier for you to adjust to living without it, plus the money you don’t need right away can start earning interest in savings. “Only keep as much money in your savings account as you have to,” says Brannon Lambert, a Certified Financial Planner with Canvasback Wealth Management LLC.
Put Your Smartphone to Use
There are a variety of apps that can help make it easier to stash away even more money without even thinking about it. Start with your existing bank and credit card apps. Many of them offer sophisticated tools that can help you track how and where you’re spending your money as well as offer advice on how to reach your financial goals.
There are also other apps that can help you get on track with saving and budgeting. Two that we like: Digit, which tracks your spending habits and helps you save small amounts of money each day without even noticing it; and MVelopes, which serves as a digital version of the old-fashioned envelope system of budgeting.
Have Fun With It!
Do you know the great part about creating a budget and saving money? It gives you the freedom to spend money on the things you really want. Crazy, right?
Find a picture of something you’d like to save for and tape it to your computer—maybe a summer vacation destination for your family or picture of that Pottery Barn chair you’ve been eying. Next time you feel the urge to splurge, sock a few more dollars into your online savings account earning way above 1%. Then visit that account at least once a month to recognize the fact that you’re making progress!
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