Yahoo Finance Have Less Than $1,000 in Savings? 4 Ways To Save More
Various factors have made the road to saving arduous for many Americans. The combination of inflation, soaring rates — which impact everything from mortgages to auto loans to credit card payments — and the resumption of student loan payments has left little to set aside for rainy days or for retirement.
Check Out: 6 Things the Middle Class Should Sell To Build Their Savings
Read Next: 7 Reasons You Should Consider a Financial Advisor — Even If You’re Not Wealthy
According to a recent Forbes Advisor survey, 28% of Americans have less than $1,000 in savings. Out of those surveyed, 32% of Gen Zers admitted to savings balances less than $1,000, followed by 31% of millennials, 27% of Gen Xers and 20% of baby boomers.
Part of the problem can be attributed to the fact that all four generations surveyed favor standard savings accounts, which typically have relatively low interest rates compared to high-interest savings options, such as high-yield savings accounts or certificates of deposit. Additionally, 66% of respondents indicated that rising living costs are the primary barrier to saving more, while 31% blame debt repayment.
And many Americans don’t expect things to get better. According to the survey, almost half expect to save the same amount or less this year, as compared to 2023.
If you’re looking to contribute more to your savings, here are some expert suggestions for boosting your balance.
Pay Off Your High-Interest Debt
“While this doesn’t directly increase your savings, it can greatly impact your cash flow,” said Brandon Galici, certified financial planner and founder of Galici Financial. “If a significant portion of your income goes to high-interest debt each month, building up your savings account will be tough.”
Galici also said that paying off your high-interest debt can give you a significant return.
“For example, if your credit card charges annual interest of 25%, and you pay off $1,000, that effectively saves you $250 in interest over the course of one year — $1K x 25%. You won’t find that rate of return with a savings account or most investments.”
Be Aware: 5 Unnecessary Bills You Should Stop Paying in 2024
Increase Your Savings Rate
Galici said that once you’ve paid off your high-interest debt, it’s important to save at least 10% of your gross income if you can. If you’re not there yet, or you’d like to improve it further, Galici said not to be discouraged. Instead, he recommended increasing your savings by 1% every quarter.
He explained, “For example, if you make $100,000 annually, multiply it by 1%. That’s $1,000. If you divide it by twelve, that’s just $83 per month, or only $38 per paycheck. I encourage you to automate your contributions to make it easier.
“Once you’ve done that for a few months, try to save an extra 1% of your income, until you have a healthy savings rate. This is a great way to make progress over time while still enjoying your life in the present.”
Look for Ways To Increase Your Income
“Many ‘gurus’ tell you to simply cut your expenses,” said Galici. “While you should spend less than you earn, it’s also important for you to find ways to increase your income, as it directly impacts your ability to increase your savings and build wealth.”
Here are some of Galici’s suggestions:
Learn new skills to boost your value and get promoted at work.
Explore new career paths or companies.
Launch a side business you’re passionate about, which has income-earning potential.
Review Your Income Tax Withholding
Laura Adams, MBA, award-winning personal finance author and expert with Finder, said one way to increase your savings is to review your income tax withholding.
“Check if you need to change your Form W-4, which you can submit anytime during the year,” she said. “For instance, if you typically receive a substantial tax refund, you likely have too much money withheld from your paychecks. By reducing your withholding, you increase your net income throughout the year, which are funds you can deposit in savings.
“However, if you have too little taxes withheld, you may have to pay the IRS when you file your return. You should receive a minimal annual tax refund, so you don’t have to pay taxes out-of-pocket.”
More From GOBankingRates
8 Rare Coins Worth Millions That Are Highly Coveted by Coin Collectors
Housing Market 2024: Home Prices Are Plummeting in 10 Formerly Overpriced Housing Markets
This is The Single Most Overlooked Tool for Becoming Debt-Free
This article originally appeared on GOBankingRates.com: Have Less Than $1,000 in Savings? 4 Ways To Save More
