Whether you’re saving money for the first time, recovering from a setback, or just want to improve your savings strategy, here are 10 banking habits that can make a big impact over time:
1. Track Your Spending
How much do you spend in a month? If you can’t answer that question, you can’t budget very effectively.
Go through a year’s worth of your expenses and break them down month by month, determining the average. This lets you know how much money leaves your accounts, and whether you should curtail discretionary spending.
2. Make a Budget
Now you know how much you spend. Combine this with how much you make — employment wages, self-employment income, business income, benefits, etc. — and you can create a budget. These aren’t just neutral documents; budgets are aspirational. So create a budget that encourages healthy financial habits.
3. Adopt the 50/30/20 Rule
One such good habit is the 50/30/20 rule. This entails devoting 50% of your after-tax income to basic needs, such as rent/mortgage payments, groceries and utilities. For wants, you can allot 30%, and dedicate 20% to savings and/or debt repayment.
4. Set Clear Financial Goals
“Save more money” is a good goal, but not a great one. What are you saving for? A home purchase? Your child’s future college tuition? A vacation? Maybe all three and even more? Set goals to motivate yourself and delineate how much money goes where.
5. Set Your Priorities
Is a home purchase your main goal? Then put your savings there first. But how does that compare to your debt? You don’t have to aggressively repay long-term, lower-interest debts, such as mortgages and student loans. But high-interest loans? Pay those off as fast as you can. Americans owe over a trillion dollars in credit card debt, so if you carry a balance every month, you’re not alone. But it’s a situation you should work to remedy.
6. Do More Than the Minimum
Paying the minimum amount every month won’t get you out of debt. If you apply the 50/30/20 rule to your budget and find you’re only paying the minimum on high-interest debts, it would be wise to alter it to something like 50/20/30.
7. Pay Yourself
The American Bankers Association recommends paying yourself before apportioning money elsewhere. In practice, this can mean scheduling automatic payments from your checking account to your savings account. Doing this means you pay your future self as you would any other bill.
8. Split Direct Deposits
The above arrangement may not be necessary if you can split direct deposits from your employer. This way, you can send some money to your checking account for expenses and discretionary spending, and some to your savings account.
9. Choose the Right Account
What kind of account is best for your financial situation? Not every account maximizes savings. And should you invest? If so, how much? You need a bank that can advise on which account and strategy may be best for you.
10. Choose the Right Bank
It all boils down to banking with the right financial institution. Contact a Vectra Bank professional today and discover how we can help you reach your savings goals.
