People often ask themselves how they can save more money; a task that in theory sounds easy, but in fact can be a real challenge for many families. While most of us want to save more, there never seems to be enough left over once things such as the mortgage, utilities, and car payments are made. According to a 2016 GOBankingRates Survey, 69 percent of Americans have less than $1,000 in savings. Here's a tip that can help you save on a consistent basis.1
Why paying yourself first may be the best way to save more money
While it may not be a new concept, paying yourself first can be an effective way to ensure that you're saving something. It works because you're not just saving what happens to be left over from your paycheck, but taking your cut before anyone else gets a slice of your income. In doing so, you'll essentially be forced to budget what's left.
First, decide on how much money you want to commit to saving every month. When you sit down to pay your bills, write yourself a check for that amount and deposit it into your savings account. Or, since most financial institutions offer online banking services, you can also transfer the funds from your checking account using your home computer, tablet, or smartphone. Then, pay your bills as usual.
If you find that you're falling short of cash every month, then you may need to adjust your set amount temporarily, or, you could be proactive and look for ways you might be able to make up that extra cash (such as brewing your coffee at home or shopping at a discount store for certain groceries). Be sure to reevaluate your budget every 3-6 months to see where you might be able to “adjust up” your set amount so you can get ahead.
Once you've established the habit of paying yourself first, your next order of business is to figure out how to save enough money to create an emergency fund. Then, think about where you might want to allocate a portion of your savings to make your money work even harder for you. For example, do you need to put away more money in your retirement accounts? Do you anticipate having to purchase a new car in the near future?
Nobody said that saving more money was easy. But considering that 43 percent of the U.S. wouldn't be able to go more than a month without a paycheck, is a clear indicator that you need to start somewhere. A good way to start saving more money is by paying yourself first!