Now is the time to step up your savings and start tucking away cash in your emergency savings fund or (with the help of a financial advisor) investing it. With many people out of work or dealing with reduced hours, it may seem odd that I’m encouraging increased savings. But here’s the thing: Getting into good savings habits NOW will help you even more in the future when you’re able to set aside even more in your savings account.

If you have a robust emergency savings account (more on that HERE), you’ll be prepared to weather any future recession, pandemic, or market slump. But you have to be consistent and approach your savings with a plan.

Even if you can’t save much right now, keep in mind that a 10% annualized return converts $1 into:

  • $2.59 in 10 years
  • $6.73 in 20 years
  • $17.45 in 30 years
  • $45.26 in 40 years

As Dividend Growth Investor says, “When I save $10 today, I know that I am really saving $452 in 40 years. Before I spend $1, I ask myself if this item is really worth the $45 opportunity cost.”

Every dollar counts. Keep that in mind as you begin ramping up your savings.

Start by taking a look at where you currently spend your money.

Do you order takeout regularly? Do you crank the A.C. in the summer? Do you tend to hire out instead of DIY-ing things (lawn care, house cleaning, oil changes, car washes)? Do you regularly splurge on your nails, hair, or wardrobe?

Give your spending habits a good, hard look and identify areas where you can tighten your belt. For instance, can you make coffee at home instead of purchasing it? Can you swap expensive beverages for sparkling water? Can you find time to do some of your own landscaping or home maintenance work?

One significant way to cut costs and start saving more money is to pay attention to your grocery habits.

(If you’d like to read about this in some depth, check out this article)

Start thinking about your pantry, and make an effort to opt for inexpensive staples (rice, potatoes, bananas). Then, supplement those staples with foods that will make a complete meal (bell peppers, carrots, black beans, etc.). Typically, the most expensive grocery items are meat. Trying swapping out some of your meat with other source of protein like eggs, beans, or cheese. Additionally, pay attention to food waste. Don’t buy more perishables than you’ll use, and make an effort to use all perishable food in your refrigerator before purchasing more. Going into the store with a few planned recipes in mind will help with this.

Another easy way to cut spending is to pay attention to your driving habits.

During the mandatory quarantine, many of us realized that we could, indeed, do much of our work at home. If you are a car commuter, working from home cuts down on both your gasoline expenditures and the wear and tear on your vehicle. If you have to make a short trip, consider hopping on your bike or walking. Not only will you save on gas, you’ll also enjoy a little exercise.

Lastly, pause before you purchase.

When you’re about to make a non-essential purchase (a new shirt, a movie or book, a new power tool), ask yourself if you really need the item. Could you rent it instead? Borrow it? Do without? Asking these tough questions on a regular basis will help you keep your savings top-of-mind. Make an effort to be extra disciplined at first, and soon this type of restraint will feel natural.

 

Even when your budget is tight, it IS possible (and necessary!) to save. A little planning and belt-tightening now will pave the way for a financially secure future.

 

NOTE: Financial security is one of my three Self-Wealth pillars. For more, please visit my Self-Wealth page or read my blog post on the topic.

 

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