10 Ways to Save This Summer
Photo by averie woodard on Unsplash
Yep, it’s summertime, that carefree time where we throw caution to the wind, book that flight, buy that outfit, spring for the fruity cocktail, let down our hair, and spend with abandon. Except, wait, it’s summer in the middle of a pandemic. Time to toss that rulebook out the window.
This is not a drill. It’s time to save.
You can do this. Maybe saving didn’t work for you in the past, but that was when national consumption was on a tear with “spend, spend, spend,” as our soundtrack. Americans have become all-too-comfortable with debt and paying backward to cover debt versus paying forward (i.e. saving) to plan for future expenses. Enter COVID-19, and the U.S. saw a 23% savings rate in the second quarter of the year. The number one reason cited was how hard it became to spend. This is a big problem, as all this saving could bring down the U.S. economy! Folks, I want you to hear me laughing. NYP (Not Your Problem). It is not your patriotic duty to hold up the U.S. economy.
Since most of us are isolating to some degree, perhaps this time has given you less FOMO (Fear of Missing Out) and shown you more JOMO (Joy of Missing Out) as you save. If so, here are some of the best ways to put your savings to work for your future self:
Save all stimulus payments, unemployment premiums, and refunds. These are low hanging fruit if they are incremental money. Forget the deck furniture, this is your chance to get a head start on saving. Stash that money in your first emergency fund or pay off credit card debt. Rather than boxes stacking on your front porch, think bills stacking in your bank account.
Join your work retirement plan. Go to HR and inquire about signing up. They might send you to the advisor on the plan, and that’s ok. Think low intimidation. People want you to save here, and so remember they are on your side if you have questions.
No work retirement plan? No problem. Start a Roth or regular IRA. It’s never been easier to go to institutions like Vanguard, Schwab, and Fidelity to set up your own individual retirement account, automate contributions, and invest with ease.
Start your emergency fund. You need freedom money: freedom to not be plunged into crisis if you are laid off, freedom to walk away from a bad job, or freedom to start that side hustle into a full-time career. Open up an account and call it “Emergency Fund,” “Walk Away Fund” or something inspiring to you. This is your pile of cash that you will not touch. Open up the account and then think of the boldest contribution you can make to that account each month. (Hint: think car payment big), and automate those funds so they disappear into this account. Wake up a few months down the road like a boss.
Pay down debt. Nope, this is not a misplaced bullet. Paying down debt can be a form of saving if you commit to converting debt payments to saving down the road. Plus, if you have a 17% interest rate, think of it like this…if a bank was offering a savings account with 17% interest would you be saving into it? I think so.
Start a car fund. What if your tire blew, and all you had to do was stress about how quickly you could fix it, not have the added stress of where the money would come from? I want you to open an account just for your car. Figure out a monthly deposit for repairs and maybe even a little more to save for the next car. (I know, completely un-American).
Save on your car insurance. Got the car fund set up? Now, go shop your car insurance policy. Did your car insurance go down by $35 per month? Great, have $35 auto transferred into your car fund. Folks, that would be a little over $400 per year, or more than the Fed reported in 2016 than the average household had in savings. (Gulp)
Start a home repair fund. Bare minimum for basic repairs to keep your house standing and rarely replace appliances (meaning, replace appliances because they are dead, not because they are out of style) on average costs 1% of the value of your home every year. Only, repairs like to come in threes and they pick the most inconvenient years, like the year you ran your car into a tree and put your kid in braces. Take back your power. Take 1% times the value of your home, and divide by 12 to get the amount on a monthly basis. Automate transfers of that amount from your checking to your savings account every month. Then, when the big three happens, you are ready.
Start a round-up account. See if your bank allows you to “round up” your purchases on your debit card and deposit that amount into savings. Talk about saving without feeling it. Where to put that round-up savings? Your emergency fund, of course! You can also do something similar with other companies like Acorns, on your credit card.
Automate. Whatever you decide, make sure to automate the decision. Whether it is setting up payroll deductions into these various savings accounts or auto transfers from your checking account to various savings accounts, you want to take this small but transformative step. Turns out automation is stronger than our brains and will keep us saving strong in times our brains want us back on the consumption train.
Saving is the new spending, and if the savings rate went to 23%, you want to join this club of people who have cash in the bank and are building their retirement savings. Now is the time. Let’s do this!