After months of holiday celebrations, those New Year’s bills can hit hard.
As the new year comes, you may be looking for fresh ideas to boost your savings, make back what you spent, and establish new financial habits.
These ten tips can help you start the year off in the right direction so you can watch your savings grow.
1. Use an Interest-Free Credit Card
Credit used responsibly can be a great tool, but only if you spend within your means and pay off your full balance every month. With interest rates as high as 24.99%, extra costs add up quickly.
Fortunately, many credit card companies offer promotional 12-24 month interest-free periods to open a new card with them. Companies like CRS use lending API technology to benefit lenders and consumers alike, so it’s a win-win for all.
Instead of paying a lump sum or using a high-interest credit card, you can pay off the purchase during the interest-free period to avoid extra costs.
2. Use the Debt Avalanche Method
The debt avalanche method is an approach to quickly pay off debt while avoiding excess interest.
In this system, you organize debt, as Dave Ramsey recommends, from the highest to lowest interest rate. While continuing to make minimum payments to all your debts, you channel any extra money you have into paying off the highest-interest debt.
Once paid off, you apply the payment you were making to the highest interest debt towards the next highest, and so on, until you are debt free.
3. Make an Extra Mortgage Payment
You may think, how is making an extra mortgage payment going to save me money? This handy tip may seem like an inconvenience in the short term, but over the lifetime of a 15-30 year mortgage, we are talking big savings in interest.
Not only can you save tens of thousands of dollars in the long run, the length of the loan will be shortened by taking this proactive approach.
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4. Open a High-Interest Bearing Savings Account
Interest rates on the average savings account at traditional banks have steadily declined over the past few decades. Contrast the 4-5% Annual Percentage Yield (APY) earned on accounts in the 1990s to the abysmal national average of .24% APY now.
Thankfully, there are many online banking options that offer competitive savings interest rates from 2.00-3.25% APY. As an added benefit, several have no maintenance fees or required minimum balances.
5. Invest in a Retirement Fund
One of the best ways to build long-term savings is by investing in a retirement fund. If your employer offers a 401(k) that matches contributions, this money will grow and compound over time into a tidy sum much larger than what you contribute.
If your employer doesn’t offer this perk, consider opening an Individual Retirement Account (IRA) such as a Traditional or Roth, which each have unique tax benefits.
With an annualized return of 9% over the history of the stock market, your money can grow far beyond a traditional savings account.
6. Define Your Savings Goals
Before the new year begins, make a list of your short, medium, and long-term savings goals. Making a plan and mapping it out will keep you motivated and on task to reach major landmarks in your life.
Goals look different for all of us, but this could be from something as small as saving money for holiday gifts to bigger goals, including paying off student loan debt or building a down payment for a home.
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7. Cook Food at Home
The sheer amount of delivery, takeout, and dine-in options can make it difficult for us to find the motivation to cook for ourselves.
Let’s face it, no one loves doing the dishes, but the thing is, this is one of the biggest areas where you can cut costs to build a savings account.
With inflated food prices on top of delivery fees and tips, costs add up quickly. Whether you are cooking for two or a family of four, the money you spend on a night of takeout can be turned into a week’s worth of home-cooked meals. Stash the money you’ve saved to build an emergency fund for a rainy day.
8. Use the 30-Day Rule
Is it love at first sight or just a passing moment? We all had the experience of an ad playing on our emotions and getting us to spend.
How many times have we given in only to find ourselves short on money for more important purchases?
The 30-day rule is a way to challenge the temptation. When you feel the desire to make an impulse buy, write it down on a list and revisit it in a month to see if you really need it so bad after all.
9. Streamline Your Bills
Subscription services lure us in with their small monthly price tags. But once you do the math, you may be surprised that you are spending a month’s rent over the course of the year on entertainment costs.
Worse still, you may not even realize how many subscriptions you are signed up for. Cut out whatever is non-essential and channel the money into your savings. Meanwhile, banking apps like Yotta show how to get free money on Cash App, which can only help!
While you’re at it, take a look at your cell phone, internet, and car insurance to make sure you aren’t paying for services you do not need.
10. Follow a 50/30/20 Budget
Starting on a savings journey can be daunting, but the 50/30/20 formula can be a great way to take some of the thinking out of the process.
In this system, you allocate your monthly income to three major categories, 50% to needs, 30% to wants, and 20% to savings or debt repayment. If you really want to kickstart your savings, consider applying 30% to that category instead of your wants.
Enter the New Year with Savings
Although cutting costs to save sounds like giving up the fun in our lives, the benefits are undeniable.
Take advantage of the turn of the year to create some new habits. Once you’ve trimmed away the non-essentials, you’ll be happy to see your savings grow.