To successfully save money, you start with setting a goal and planning.
People in their 20s right now are two generations divided with the youngest Millennials and oldest Gen Zers, and while their financial goals are all different, accomplishing their goals is achieved by making—and sticking to—a plan. The tips below are compiled from credit card experts, how to save money gurus, and financial podcast hosts and could help in 20-somethings’ accomplishing their savings goals.
Have a budget, like the 50/30/20 rule
When considering a budget formula, Listen, Money Matters host Andrew Feibret suggests the 50/30/20 rule because it’s simple: 50% of your income goes to necessities like rent and utilities, 30% goes to wants like eating out and entertainment, and 20% goes to financial goals, including savings or paying off debt. Following a budget will allow you to make budgeting a habit, which is a healthy habit to have.
A bonus tip is to wait 24 hours before making online purchases. You can save items in your cart instead and if you remember the item after 24 hours, then go for it. If not, maybe the product wasn’t as vital for you as you originally thought.
Use the Save Debit Invest card
Often, tips to save money include sacrifice. Don’t buy your latte from Starbucks. Don’t eat out at lunch. These sacrifices add up over time, which is helpful to save money, but the Save Debit Invest card can also help you earn investment returns with your everyday spending.
Let’s imagine each month you:
- Spend $536 on qualifying purchases, like cafes and restaurants.
- Save invests $536 into your chosen investment strategy.
- In 12-months’ time and each month from there on, you are paid any positive investment return generated, less Save’s management fee of 0.59%*. On average, your Debit Invest card’s earning potential beats the best debit rewards programs.
Name your savings accounts
“Most of our decisions and motivations are housed in our emotional brains, not in our rational brains. That’s why abstract concepts, such as ‘savings account’ or ‘retirement’ are not very inspiring,” said Certified Financial Planner Brad Klontz, Psy.D., founder of the Financial Psychology Institute, to Acorns.
Therefore, renaming your account from “Acct. 9601” to “Hawaii 2023” or “Other people’s weddings” will allow your emotional brains to respond. Additionally, it gives you a clear picture of how much you’ve saved for each goal.
Check your credit card statements
Each month, you pay off your credit card statements—ideally the full statement balance so you’re not racking up credit card interest. But do you check each purchase you made during that statement period? Doing this will keep your mind fresh to any monthly subscriptions you have and can keep you accountable for how you’re spending your money.
Get rid of your car payment
Did you know most cars are depreciating assets? Bobby Hoyt, finance blogger behind Millennial Money Man, suggests instead to find an affordable used car, pay for it in cash, and use the monthly payment you might have spent before to put toward your financial goals. According to LendingTree, on average, Americans’ car payments for new and used cars are $563 and $397, respectively, so save those monthly car payments. Bonus points if you revert the would-be cost of a car payment into an automatic monthly transfer from your checking to your savings account.
Negotiate your bills
Adulting will teach you certain things can be up for negotiation. Service providers like your cell phone or internet company, car insurance, etc. have several competitors trying to swipe you as their customer. Oftentimes, calling your providers to ask about promotions or discounts can sometimes knock off a hefty sum from the monthly bills, which, obviously you can put the money saved toward other expenses or your savings goals.
Identify your “baseline problems“
“I think of personal finance like dieting,” Erin Lowry, author and founder of the Broke Millennial, told Forbes. “If you do a crash diet, you will lose a ton of weight and that is great but odds are, it is going to come back because you haven’t fixed the baseline problem.”
If you instead identify your baseline problems, you can better plan your strategy around maintaining your savings plan. Do you need to watch Sunday football at a bar? What if you invited your friends to your place to watch the game, instead, thus saving you from the bar tab? Is a manicure required for you to look presentable at work? Statista estimates the average cost of a nail salon manicure in America is $22.75, so imagine if you saved a portion of that by doing your own manicure at home, instead?
This is the first post in a four-part series on how to save money at certain ages. Return every 2 weeks for the following posts or follow Save on Twitter, LinkedIn, Facebook, or Instagram.
*Any investments that are made on your behalf will be charged a management fee of 0.59%, if there are returns. If your returns are less than 0.59%, there’s no fee. You can see more information about our fees by reading Save’s Terms & Conditions.