Are you looking for the best ways to save money this year? Saving money is a popular new year’s resolution. Whether you’re working towards a specific goal, saving for retirement, or just want to build your emergency savings, these 8 tips for saving money each month will help you end the year in a stronger financial position.
1. Increase Your Savings Account Contributions
“Saving should be your biggest expense” is a common adage among financial experts. If you want to save more money this year, set up an auto recurring transfer to your savings account every pay day (or whatever schedule works best for you). Putting your savings on autopilot means you don’t have to remember to do it manually, and chances are you’ll hardly notice the difference.
If you already have a recurring transfer established, increase the amount. Even a small increase like $5 or $10 more each will help increase your savings over the year.
2. Increase Contributions to Your Retirement Accounts
Again, an easy way to save more is to up your contribution amounts to your 401(k) and IRA. Saving for retirement in one of these tax-advantaged accounts will help supplement your social security income so you can live comfortably in your post-work life.
If your employer offers a 401(k) or 403(b), make sure you are contributing enough to get the full employer match (if one is offered). Learn when you are fully vested in your employer’s contributions, especially if you are considering a job change. With every pay raise you receive, increase your 401(k) contribution by a percentage point. You may also be able to opt into an automatic annual 1% increase in your contribution amount.
The annual contribution limit for a 401(k) is $22,500 in 2023. You may not be able to max out your contributions, but you can always make a small increase. Since this comes from pre-tax dollars, it won’t affect your paycheck amount by much.
Individual Retirement Accounts (IRAs) are another option for tax-advantaged retirement savings. You can open one on your own, whether you are already have an employer-sponsored retirement savings plan or not. Choose between a Traditional IRA, which offers similar tax benefits as a 401(k), or a Roth IRA, which offers tax-free growth and disbursements in retirement.
The annual contribution limit for IRAs is $6,500 in 2023.
Both 401(k)s and IRAs offer an additional “catch-up” contribution amount for people age 50+. This can be helpful if you got a late start in saving for retirement.
3. Pay Off or Pay Down Credit Card Debt
Credit cards usually come with the highest interest rates of any kind of debt. It’s best to pay off your credit card balance each month to avoid interest charges. However, if you are currently carrying a balance on one or more of your cards, make it a priority to pay down. The more you are spending on debt payments each month, the less you have to save.
It’s important to identify the habits, choices, and circumstances that got you into credit card debt in the first place. If you don’t make changes, you could very well end up in debt again after working so hard to pay it off. For example, if holiday expenses always catch you unprepared, set aside money this year specifically to save for next year’s holiday shopping.
There are two popular approaches to paying off credit card debt.
- Snowball: Start with the lowest balance and pay as much as you can to this card while making the minimum payment on everything else.
- Avalanche: Start with the highest interest rate, regardless of balance, and pay as much as you can to this card while making the minimum payment on everything else.
Some people need a quick win to stay motivated, so the Snowball Method is a good approach. Others want to save as much as possible on interest, so knocking out the highest rate first will help them achieve this goal.
Another option is to consolidate multiple credit card balances with one new, lower interest rate personal loan. This could help you save more by lowering the amount of debt payments you make each month. You just want to be sure you have made the necessary changes to not rack up a credit card balance again.
4. Eat At Home and Shop with Coupons
As of November 2022, the cost of food at home was up 10% year over year and food away from home was 12% higher. You’ve probably noticed this at the grocery store, while dining out, or while ordering takeout food. So, while you still need to eat, reducing your food spending (especially by cooking and eating at home as much as possible) can help you save more this year.
When grocery shopping, look for sales, coupons, and generic alternatives to name brands. You can also use rebate and cash back apps like Ibotta, Fetch Rewards, Coupons.com, and more.
To stay on track with cooking at home, get organized by planning your weekly meals in advance and identifying when you will cook each day or for the week. Eat leftovers for lunch and on non-cooking nights.
If you enjoy eating out, save it for a special occasion or designated day of the week. Using takeout food as a convenience can add up quickly.
5. Look For Ways to Cut Spending
In addition to reducing your spending on food, look for other areas where spending can be reduced or eliminated. Start with “low-hanging fruit” like recurring subscriptions and memberships. Cancel the ones you no longer use and consider moving down to a lower price point if that’s an option.
Utilities are another prime area for reducing spending. From temperature control to water conservation and electricity, reducing your consumption will lower your utility bill.
When it comes to buying something new, wait at least 24 hours to see if you still really want the item in question. It’s easy to see something on social media or a website and get excited, but often that enthusiasm wears off. You can save money by reducing spending on non-necessities.
6. Refinance Your Mortgage
Refinancing your mortgage can help you save money by lowering your interest rate. If your credit score is higher now than when you bought your house, or if average rates have fallen, reach out to a local Moody Bank mortgage lender to review your options and see how much you could be able to save on your monthly payments. Refinancing could also help you pay off your mortgage faster, which will save you money in the long run.
If you have enough equity in your home, you could do a cash out refinance, using the extra cash to finance a home improvement or consolidate higher interest debt.
7. Try Out “No Spend Days”
A “No Spend” day, week, or even a month is a period of time when you commit to not spending on anything except necessities. From to-go coffees to clothing and other items, these purchases add up. To start, schedule an upcoming “No Spend Day.” Once you experience that, you may want to challenge yourself to do a full no spend week. Whatever money you would have spent on those days, move it over to your savings!
8. Make and Stick to A Budget
If you’re not budgeting, you don’t really know where your money is going. The process of tracking your spending and creating a budget will help you stay mindful about your spending. Think of your bigger goals when budgeting feels hard. For example, it may be easier to commit to cooking at home if you think about the vacation you’re saving for. If you fall off the budgeting wagon, just get back up and start again. You may have to try a few different approaches before finding the best one for you.
Open a Savings Account or Money Market Account with Moody Bank today!
You may be starting the year off with some financial anxiety but imagine how good it will feel to reach the end of 2023 with more money than ever in your savings accounts. You will be ready to take that vacation, get an early start on your holiday shopping, or simply enjoy the peace of mind that comes from having an emergency fund. Open a new savings account with Moody Bank or contact us with questions.