1 in 4 Americans do not have any emergency savings, according to a recent poll conducted by Bankrate.com. If you’re one of these people, when you lose your job, get swamped with medical bills or need unexpected car repairs, you could be facing a financial crisis. Here are six steps to trick yourself into beefing up your savings account while spending less money.
All cards are not created equal. Don’t trust yourself with credit cards? It may be time to stash your credit cards out of sight and start using a debit account. Not only does it force you to tighten up your budget belt, you’ll also reduce the risk of high-interest credit card payments.
Start up a “secret” savings account. Setting up automatic deposit into a hard-to-reach savings account can be a great deterrent for unwanted spending. Limited funds on hand should help reduce unnecessary temptation for splurges while building up a strong safety net.
Pay yourself. Saving should be rewarding. Set up a small allowance for yourself, for a special occasion or treat when you’ve successfully reached a goal range. Knowing that you have some money for small purchases every month may help reduce the urge to purchase large items after you’ve struggled so hard to build up your savings.
Recent promotion? Save the raise! It’s easy to spend your financial windfall, but before you fall into bad habits, increase your direct deposit amount right after your pay increase. Instead of spending the extra cash, put it towards your retirement account, emergency savings, bills or something special, such as a family vacation before you adjust to a higher paycheck.
Make the payment. If you’ve paid off your credit card or car loan, you may be looking to spend the freed up cash on other things. Consider using the same payment amount you would have previously made to a card issuer or a bank to yourself instead.
Don’t forget the small stuff. It’s been repeated before, but cutting out that $4 cup of coffee can do wonders for your budget. Take the money you would have spent on extras and stash it in a separate bank account. Watching it grow will hit home how much you spend on unnecessary items. I started a separate account to save up for a trip to Las Vegas, and every chance I had I stashed a few dollars here and there. Before I knew it, I had built up a strong savings account separate from my daily debit and checking account. I paid for everything in full – no credit cards!