3 Ways to Beef-Up Your Bank Account Balance
You get two huge benefits from having money in the bank. First, it feels good because you can see yourself making progress towards your goals. It’s also good for your finances: you can absorb shocks and surprises without taking on (sometimes toxic) debt. But how do you actually increase your account balance to the point of having a healthy chunk of change in savings?
We all know the formula: Save more and spend less. That knowledge alone is usually not enough, but the tips below might help you pull it off. Before you get into the tactics, it’s wise to think about your goals (the things you want, and why you want them) – that’ll make the whole process more bearable and improve your chances of success.
Pay Yourself First
One of the most important steps to take is prioritizing saving. You probably know exactly how much you spend each month on housing (your rent or mortgage payment) – you need to make that payment or you’re out on the street. Can you say the same about the money you put towards your financial security?
The best advice is to “pay yourself first” which means making sure that you actually save money. When it becomes a priority – especially if it’s a line item on your budget or an automatic process that you can forget about – it can become a reality. Having a fuzzy desire to save more isn’t enough for most people. How can you start doing this today?
- Set up an online savings account and an automatic monthly transfer into that account (start with a few dollars if that’s all you can afford).
- Tell your employer to send a portion of your paycheck to a savings account – not the checking account you use every day (and withdraw cash from).
- Sign up for your employer’s retirement plan.
- If you use a budget, create a new category for “Monthly Savings.”
If you’re in a leaky boat, you need to fix the problem quickly. The fastest fix for most people is to cut costs. It’s also the most painful (and it might not be the most effective), but it’s a necessity if you want to increase your savings.
How do you do it? Get a handle on how you spend. Track your expenses, whether you use a pen and pad, an app, or budgeting software. Don’t put too much time and energy into picking the best “system” to track your spending – that’s just a distraction (in this case the perfect is the enemy of the good).
If you have a hard time keeping track of things, spend electronically so that your bank creates a record of every transaction. Pay your bills online, make purchases with a debit card (or better yet, a credit card that you pay off every month), and minimize cash spending. The numbers don't lie. Look at where your money actually goes, and evaluate if you’re really getting what you pay for. There are plenty of ways to cut costs.
3 Ways to Earn More
By cutting costs, you can save money this month. But you’ll probably get better results if you increase your income (unless you’re one of those people who earns six figures and is still diving into debt).
Unfortunately, it takes time to earn more, and it’s not as easy as canceling cable TV service. In some cases, switching jobs is all it takes (if you’ve been with the same employer for many years and raises have been slow), but most people have more of a challenge.
One quick way to earn more is to add part-time work. That also means you’ve got less time available for other things, and it’s grueling to keep that up for decades. But, if you just need a quick boost, another job for a few months or so might get you back on your feet (and your main job will support you and your family after that).
If you need a more substantial change, start your own business – you’ll have more control over your own destiny, and more upside potential. You can manage your risk by starting part-time on the side, and then transition to a full-time gig as things pick up.
Another tried-and-true approach is to develop your skills and “employability” so that you can earn more over time. That might require more training and education, as well as a resume that highlights your value to employers. Over the years, your efforts should pay off.
Once you’ve built up your bank account, start earning more on the money you’ve saved. This won’t make or break you financially, but you don’t want to leave cash on the table. Make sure you’re earning a competitive rate on your savings (there’s probably no need to switch every month for the highest rate in the nation), and use CDs and money market accounts to earn more interest.