Starting 2022 without savings? 5 tips to get stronger
Here’s how to grow your savings and give yourself the peace of mind that comes with it.
- You should aim to have a minimum of three months of living expenses in savings.
- If you’re starting the new year with no money in the bank, you can build your savings by budgeting, adjusting your bills, and increasing your income.
We all need savings on hand for emergencies. In fact, as a general rule, you should have enough money in your savings account to cover at least three months of essential bills.
If you’re starting the new year with $0 to your name, don’t despair. But also, don’t just sit around and do nothing. If you don’t increase your cash reserves, you could find yourself in serious hot water if an unexpected bill arises. Here are five steps you can take to grow your savings this year.
1. Have a budget
A budget will help you track your spending and see where your money is going each month. And having one could make it easier to identify which expenses to cut so you can free up more money to save. You can make a simple budget using a notebook or spreadsheet. Or check out these budgeting apps.
2. Make your raise automatically go to your savings
If you got a raise for 2022, that’s money you’re not used to getting. Rather than spending it, it is better to send it to your savings account. In fact, a good bet is to make this process automatic. Arrange for extra money from your paycheck to go straight into savings, before you have a chance to spend it.
3. Refinance your mortgage
If you own a home, your mortgage can be your biggest monthly bill. And if you’re able to lower that bill by refinancing, you can take the money you’re not spending on housing and save it instead. It pays to refinance your mortgage if your credit score is strong and you can reduce the interest rate on your loan by about a percentage point or more. Contact different refinance lenders and see what rate deals they offer if you think it makes sense to swap your existing mortgage for a new one.
4. Consolidate your credit card debt
If you owe money on multiple credit cards, you may be spending a lot on those monthly payments. That’s why a balance transfer might make sense. This way you can move your different balances onto a single card, one with a lower interest rate, making your debt more affordable. The less money you spend on credit card interest, the more money you will have to save.
5. Increase your income with side work
You may only have so much money that you cannot withdraw from your current monthly salary for savings purposes. If so, consider getting a side gig. There are plenty of options to choose from, and this income boost could be your ticket to significantly increasing your savings. That said, if you’re going to have a scramble, be sure to set aside some of that income for the IRS if it’s not automatically taxed so you don’t run into trouble later.
The longer you go without savings, the more likely you are to experience financial stress. If you don’t have any savings, follow these five steps to increase your cash reserves and give you much-needed peace of mind.
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