By April Lewis-Parks
One of the most common reasons many people cite for failing to save money is that they make too small a salary to devote anything additional to a savings account. While stretching a small income can be challenging, it’s not impossible, and individuals who want to build a stronger financial foundation that gives them more freedom should seek out ways to improve their savings contributions.
An important step in developing a consistent savings account is to realize that it will take time and every little bit – even if it’s a small amount – does make a difference. For example, a recent article from Fox News noted that individuals who put $15 a week in a savings account for 25 years will wind up with $62,183, if the annualized rate is at least 8 percent. These figures should comfort individuals who only have a small amount to spare each pay period.
There are also other ways to build savings beyond the amount that is left over after all the bills have been paid. A common mistake individuals make is budgeting without a specific goal or plan in mind. By building a budget around savings goals, consumers can discipline their spending and determine areas in which they can afford to cut back. For example, individuals should sit down and examine how much they spend on discretionary purchases, such as eating out, dry cleaning, trips to the hair and nail salon and material purchases. They may find that a large portion of their paychecks go to these categories and leave them with little left over for savings. Individuals can take it a step further by switching to more affordable utilities providers and cellphone plans.
Simplify the savings process
Another obstacle to saving money is waiting until all bills have been paid to transfer money from checking to savings. Instead, consumers should also make a habit of paying themselves first. A budget will educate consumers on how much they can feasibly save while still covering their needs. So rather than waiting to transfer money to savings, automating a certain percentage of income to be automatically transferred to a separate account when they get paid can be helpful. This can lower the temptation of spending the money in a checking account on unnecessary items and also allow workers to save consistently.