It’s not always easy to save money, but in the long run, it’s always worth it.
The 50-30-20 rule is a popular way to budget. It says that 50% of your income should go to necessities, 30% to pleasures, and 20% to savings and paying off debt.
How can more money be saved when money is tight? You can use these ways to save money for many different things.
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Automate your savings
The first step in setting better savings goals is to know your current financial situation. Another smart way to save more is to set up automatic savings.
Using money automation is a simple way to keep your savings and spending separate. When you have money in your bank account, it can be hard not to go shopping. You can avoid this temptation by setting up a way to save money on your own.
You can set up a direct deposit into a savings account or regularly move money from your checking account to a savings account to make saving easier.
Direct deposit into a savings account is a convenient way to save a certain amount of money or a certain percentage of your salary. You can set up a regular transfer from your checking account to your savings account of a certain amount that you choose.
Meanwhile, you can draw funds for savings via stellar spins.
Set up emergency funds
Before starting to save for other goals, it’s best to put away three to six months’ worth of living costs as a safety net.
Add your savings for emergencies to your regular savings. It can be used as a backup plan if you need to make an unexpected purchase and don’t want to use your 401(k) or other long-term savings accounts. If you have a well-stocked emergency fund, you won’t have to use credit cards with high-interest rates or payday loans to make ends meet if you lose your job, need a big car repair, or have any other unexpectedly high cost.
Judith Ward, vice president and senior financial advisor at T. Rowe Price in Owings Mills, Maryland, recommends job seekers save “depending on how long you intend to be looking for work.” Because of this uncertainty, “one-income households” and “those who get paid on commission” may try to improve their standard of living.
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Tackle high-interest debt first
Interest costs add up month after month, so it’s important to pay off high-interest debt as soon as possible to save as much money as possible.
It is common to pay off the loan with the highest interest rate first when trying to get out of debt. When that debt is paid off, move on to the next one with the highest interest rate. You can slowly reduce how much you have to pay in interest by using the avalanche strategy.
Bankrate has a calculator that lets you figure out when you can pay off your credit card balance.