New year, new you, right? It is now February and maybe you have stuck to your resolution and maybe you haven’t. Better late than never to make a new one and STICK TO IT! For me, increasing my savings by $100 a month was a resolution of the past, but how did I pull it off?
Savings is so important, especially if you have big plans in the future which might include buying a car or home, traveling, starting a family, paying off student loans, etc. In as early as college, financial professionals recommend that an individual retain an emergency fund. This is something that is put away and touched only for emergencies. An emergency would include any expense that you might not have planned for. Examples of this would be getting a flat tire and having to buy replacements, job loss, the loss of a family member or spouse, unexpected home repairs, etc. We recommend that an individual has 3-6 months worth of expenses put away in their emergency fund.
For some of us, spending is easier than saving, so how can we change our mindset to favor savings over spending? Below are tips to ensure that you are putting an adequate amount of money into your savings account and maintaining a system so that your savings funds are never scarce.
- Change your direct deposit to go into two different bank accounts.
This is an option that not a lot of students and professionals know about. For many companies, there should be an option when setting up your direct deposit to have only a percentage of your paycheck go to one bank account and the remaining balance go into the other. For example, you could elect that 10% of each paycheck go into your savings account and the remainder be deposited into your checking. This ensures that you are never really getting the option to spend the portion that is going into your savings because it is never touching your checking account.
- Have your savings account monitored by a different institution or bank.
Having your savings account at a different bank than your checking account makes it more difficult to access. This will also ensure that you will not transfer funds between the two accounts. Transferring money from my savings account to my checking account to cover my spending habits is something that I have personally struggled with in the past. This tip is something I highly recommend for those that may find themselves transferring money between the two accounts, especially at the end of the month when funds tend to get lower.
- Work it into your budget.
If you work with a personal budget each month, this tip should be very simple to incorporate. Some might work with a weekly, biweekly, monthly, or annual budget, and making sure you have a separate section for savings can be done in each of those scenarios, however, the amount allocated may differ. For example, if I work with a monthly budget, I want to make a list of each section I want to allocate money to. Sections could include clothes, restaurants, groceries, extracurriculars, etc. I would also want to add a savings section. For myself, I choose to put whatever I have leftover at the end of each month into my savings account. This being said, determining a set amount of money may make it easier for an individual to hold themselves accountable and make sure that they are deferring money into their savings account. This could be any monetary value the individual chooses but mainly depends on how they allocate the other sections of their budget.
- Create a budget.
Not only can working savings into your budget increase the amount you save, but simply having a budget can create the same effect. A budget is a tool that is created by the individual to hold themselves accountable for their spending. When you have a budget, you are ensuring you are not spending more than you earn. Most individuals choose to not allocate their whole income to a section of their budget, creating extra money at the end of the budgeting period. This is what could be considered ‘savings money’, or the money that could be put into a savings account.
All four of these tips will ensure that you will create a healthy savings plan for yourself. This is important now, but especially post-graduation, when expenses and responsibilities increase. Establishing an emergency fund is essential to your future. We never know what tomorrow might bring, but being prepared will assist in deflecting the direct financial impact.
If you have a question or would like help establishing a savings plan for yourself, Powercat Financial is here to help! We are currently available for online or phone financial counseling sessions for students. Free appointments may be requested via our website link at www.k-state.edu/powercatfinancial.
Powercat Financial will also be hosting our annual Love and Money event February 9, 2021 at 6PM CT. We will be sharing tips and tricks to merging your finances and lives together. Please RSVP TODAY at http://bit.ly/3t50KGI to receive the Zoom link!
Claire Herrmann
Peer Financial Counselor I
Powercat Financial
www.k-state.edu/powercatfinancial
