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How You Can Save an Extra $5,000 This Year
From side hustles to cutting expenses, finding time and money to pad your savings is no easy feat.
According to CNBC, nearly 60 percent of Americans have less than $1,000 in their savings account—far less than what they need to cover an emergency expense, like a trip to the hospital or an unexpected car repair.
Not sure how much you should be saving? It depends on where you are in your career—and what your money habits happen to be. But the general consensus is somewhere between 15 and 25 percent of your paycheck.
“Aim to save 25 percent of your overall gross pay [in your 20s],” Kimmie Greene, a financial expert for Intuit, suggested at CNBC. “That includes any retirement account contributions, matching funds from your company, cash savings or money you have invested elsewhere, like in index funds or with robo-advisers.”
Need to play catch-up? You can get on top of your savings with these six tips for saving an extra $5,000 this year.
1. Automate Your Savings
In an ideal world, you’d be able to put about 20 percent of your income aside from each paycheck into savings.
That’s the logic behind the “50/30/20 rule,” anyway—a guideline used by personal finance experts to help people rethink their spending and saving habits.
According to the Mint blog, you should put about 50 percent of your income into necessities, like rent, utilities, and groceries, 30 percent of your income toward discretionary or personal spending, and 20 percent of your income into savings.
If you have difficulty budgeting that amount on your own each month, consider signing up for a service that will help you do it automatically.
There’s Digit, an app with a small monthly fee that sets aside cash in a savings account every day. Since the app tracks your spending habits, the amounts set aside are often small—$5 here, $1 there. Essentially, you save money every day without thinking about it—and, according to Fast Company, the average Digit user socks away $2,500 a year.
New online bank accounts, like Chime Bank, can help you automate your savings, too. Every time you spend money, the bank will automatically round up to the nearest dollar and put the difference in your savings.
Based on data provided by the company, customers who enrolled in automatic savings plans saved as much as three times more than customers who didn’t—averaging about $4,500 per year.
2. Amp Up Your Side Hustle
Lyft. Airbnb. TaskRabbit. The gig economy has made all sorts of side hustles possible—which means you have an opportunity to put aside an extra $500 per month, says personal finance expert Shannon Insler.
“AirBnB ranked head-and-shoulders above the competition in terms of the most profitable side hustle,” Insler writes at StudentLoanHero.com. “TaskRabbit came in second, and Lyft in third.”
If you have a profitable side hustle and aggressive savings goals, that extra $500 per month could transform into $6,000 in your bank account.
3. Get Paid for Your Opinions
Why not get paid for something you already think quite a lot about—how to spend your money? Taking brand surveys online requires a little bit of time, but you get paid for your efforts, and it doesn’t take up your whole day.
Some surveys only take about five to 10 minutes—but you’ll earn points that can win you prizes, gift cards, or cash. Some survey users estimate they can make about $10 per hour, just for filling out surveys. Even if you only spend a few hours per month taking surveys, you could wind up with an extra $250 at the end of the year.
4. Open a New Bank Account
Want to get serious about saving? Consider opening a new bank account with a bank that will pay you for your troubles.
Many banks offer sign-up bonuses—some as high as $300—to new customers. That will put you well on your way to saving an extra $5,000 this year.
But there’s usually a small catch, says personal finance expert Tony Armstrong. “To qualify, you’ll likely have to set up direct deposit with the bank and keep the account open for at least a few months,” Armstrong explains at NerdWallet.
“Before signing up for a checking or savings account bonus, familiarize yourself with the bank’s fees, including monthly service charges, and how to avoid them,” he adds.
Fees and overage charges can zap your savings—so be sure to stay on top of your new account.
5. Master Your Credit Card
If you’re draining your savings to pay off a high credit card bill each month, it’s worth re-examining your credit strategy. In addition to budgeting like a pro and transferring your balance to minimize interest payments, consider signing up for a rewards card that gives you cash back for everyday purchases.
According to NerdWallet, some of the best cash back credit cards include Discover, which gives you 5% cash back on everyday purchases at gas stations and grocery stores. American Express gives you a $200 statement credit if you spend $1,000 in new purchases in the first three months of use, in addition to other cash-back offers.
Because these are relatively high cash-back rewards, you’ll need a good or excellent credit score to qualify. And remember: it’s best to be able to pay off your balance in full for any credit card each month. That way, you can actually take advantage of any extra cash-back rewards that come your way—just by sticking to your everyday budget.
6. Cancel Stuff You Don’t Use
Americans are bad at cancelling things. Old subscriptions, extra cable channels, and other premium services are wasted—while companies pocket the monthly fees.
“It is often easier to start a recurring service than end it,” explains finance columnist Ron Lieber at The New York Times, “and even when you spot the $9.99 a month, you may not want to put the $9.99 (or more) of effort required into getting rid of it. Which is exactly what these companies want you to think.”
If you’re spending between $10 and $20 per month on services you don’t use, you could be draining your savings by $250 per year— or even more, if you have multiple services that prove difficult to cancel.
Not sure how to get better control over your expenses, or simply don’t want to deal with cancelling them? Consider a service like Trim to help you identify and cancel subscriptions. The app will analyze your spending and make suggestions for subscriptions to cancel. You can tell the service to cancel unwanted expenses, and they’ll take it from there—for free.
So if you’ve had difficulty parting ways with Planet Fitness or Audible, let Trim do the work for you. Not only will you have more money in your pocket each month, you’ll be able to save more, too—helping you meet that $5,000 goal.
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