5 Things to Know About Saving Money
In today’s economy saving money is an important skill. Our economy is in a constant state of flux, and finding a dependable job you can throw yourself into in the long term is no longer as simple as it was for previous generations. Because of that, learning all there is to know about saving is more important than ever.
Saving is a complicated skill that many people spend all their lives trying and failing to master. Thousands of books have been written on the subject and more methods than there are diets. It can feel overwhelming to step into the stream of that discourse, and so today we’ve gathered 5 fundamental principles of savings that every American should know.
1. A Little Can be a Lot
One of the most important things to realize about saving money is that you don’t have to cut massive portions of your life off to spend less. A dollar a day is $365 a year, and five a day is $1,825.
Where can those little cuts and savings come from? Some of the most common little expenses people cut out when trying to save money are vices like drinking or cigarettes (which you should for your health anyway), eating out, getting coffee every morning, and playing the lottery. All are small expenses that nonetheless nip away at your bank account, and over a long period stack up into big headaches.
2. Don’t Let It Sit
An important aspect to remember about savings is that if it’s just sitting in your bank account it’s going to waste. Inflation means that just letting money sit slowly degrades it’s worth so that five thousand you may have in there now won’t be ‘worth’ the same amount in ten years.
How do you avoid ‘losing’ money in savings? Easy. You invest. Most people opt for putting their savings into retirement options like a 401k or index fund. These are strong long term options but on the lower end of potential rewards. Riskier, but profitable, investment options include real estate and playing the stock market. Both are more time-intensive than simply sticking money in a retirement account, but not prohibitively so if you really want the most bang from your (saving) buck.
3. It Isn’t Taxable
This isn’t something that’s obvious on the surface, but can potentially add up quickly. The simple fact is that if you had a choice between making more and saving more (assuming the two amounts are equal) then you should opt for savings every time. The simple reason is that, despite both keeping your bank account full, savings aren’t taxable, while income is.
Why is this the case? Who knows. Our tax policy is twisted and complicated and full of loopholes and dead ends, but no matter the reason, it’s true that for the most part as a system it largely turns a blind eye towards your savings and its view of your financial fortune is almost entirely relegated to your income.
4. Apps Can Help
We live in the age of the app, and when it comes to saving you should make full use of all the variety of them out there. There’s a multitude, but the most useful are:
- Mint for budgeting and visualizing your finances and its ability to help you craft a financial plan for your future
- Acorn for automatically rounding up your purchases and tucking the extra cents into a dedicated savings account
- Robinhood for investing quickly and simply in the stock market right from your phone
There are countless other apps out there that may benefit you, and we encourage you to experiment and see which ones are a net benefit and fit your style and life best, but these three are a good place to start.
5. Sometimes It Isn’t Enough
No matter how well we plan or save for the future, sometimes it simply isn’t enough: a car accident, a trip to the emergency room, or a hurricane can all strip away our savings in a single afternoon and leave us in a financial hole without any resources at our disposal.
If that ever happens to you, one option to consider is a title loan. Title loans are a type of short-term loan that uses the value of your car to get you to cash fast. They’re versatile and easy to get and maybe the best option for your situation.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.