We spoke to financial planners to see if they had some hacks that could make an even bigger difference in your balances by the end of the year, over the course of your mortgage and even over your lifetime.
It turns out, many people neglect saving where it could make the biggest difference—in small amounts, done in an automated way, so that over time they pay off big in the long-term.
Here are three important ways you could be automatically boosting savings:
It’s crucial to have an emergency fund, but finding the right strategy to set aside money can be easier said than done—as anyone who’s ever set up an automatic savings deduction from their regular checking account, only to go into overdraft when they forgot about it knows all too well.
With Digit, an app that automatically draws small amounts into a side savings account daily (offering 1 percent interest), you won’t have to worry about it since it uses an algorithm to calculate the right amount to withdraw each day, based on your income and spending.
What’s even better is that you get a text alert each morning stating your overall balance, so you’re always aware of exactly how much you have. You can withdraw from your balance anytime.
Potential Savings: $2,000-$6,000 this year depending on how much you earn, plus saving on overdraft fees.
According to financial expert David Bach, readjusting your mortgage payments from once a month to every two weeks could potentially save you tens of thousands of dollars over the life of your mortgage.
He recommends taking your monthly mortgage payment, and splitting it down the middle, and then making the payment on the same day, every two weeks, in line with the days you get paid.
So, for example, if you pay $1,500, now you’ll be paying $750 every two weeks. Since you’re now making payments every two weeks rather than once a month, you’ll be making one extra payment a year.
Bach says that it depends on your mortgage, but paying this way could mean you could save up to $50,000 in interest on your loan, or the equivalent of paying it off two to three years sooner.
Potential savings: $50,000 over the course of your mortgage.
According to financial planner Graham Summers, many people only put away the same percentage their company will match (say, 6 percent), which is a big mistake if you can afford to contribute more than that.
“If you're only contributing up to the amount your employer is willing to match, you're leaving a ton of future money on the table. Stocks historically return 6 percent per year.
Every cent you put into your 401(k) is being compounded over your career. That extra $100 per month in contributions, through the power of compounding, can translate to hundreds of thousands of dollars more in retirement funds.
If it’s feeling too pinched, you can always decrease it, but most people never do.” Summers also recommends reframing your savings mindset to help you see the benefit of stashing, rather than cashing, your paychecks.
“Increasing your contributions is the equivalent of ‘investing in yourself,’ whereas spending the money does little or nothing for your long-term financial stability. The former actually has a benefit. The latter just means you have to work more. Which one do you prefer?”
If you don’t work for a company offering retirement benefits, check out Stash, which allows you to invest micro-amounts, such as $20 a week, for both funds and individual stocks, such as Amazon and Disney. You can also use its system to set up an investment account.
Or, you can do this at ElleVest, too, an online investing platform founded by Sallie Krawcheck. Both tools make it easier to log in and see how investments are doing on a daily basis, which, say the experts, makes you more invested in managing your own funds for greater success.
Another thing that could be draining your savings—the fees you’re paying for your 401K.
A difference between a .5 percent, 1 percent, or 2 percent fee could be the difference of hundreds of thousands of dollars when you go to retire: “Some 401 (k)s have very high fees and employees often don’t realize that they are the ones paying them in most cases. They usually believe their employer covers all the costs. It pays to look them up,” says Bobbi Rebell, a certified financial planner and host of the Financial Grownup podcast.
Potential Savings: Hundreds of thousands over a lifetime.
Repeat after us, set a date on your calendar to make these changes. Your future self will thank you.
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Meghann Foye is a NYC-based writer covering personal finance, home and lifestyle topics. Her articles have appeared in Redbook, Good Housekeeping, Parents and Refinery29.com, among others.
This material is designed to provide general information on the subjects covered. It is not, however, intended to provide specific advice or to serve as the basis for any financial decisions.
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