A few months ago, I was hanging out with a good friend at a bar. In between rounds of drinks and amid the din and bustle, she shamefully admitted that although she had nearly $20,000 of credit card debt, she still needed to tap into her credit card. It’s not that she was a frivolous spender or lived recklessly without a spending plan. In fact, she was super meticulous with her budget. She simply wasn’t earning enough.
After her bills were covered she rarely had much in her savings to enjoy a fun night out with friends. Because she felt so squeezed, she resorted to reaching for the plastic.
It’s obviously far easier to save money for an emergency fund when you have more money coming in. But how is it possible when your finances are tight?
If your circumstances make it challenging to save, you don’t have to move somewhere with lower living costs or get a huge promotion to start putting more money away. You can save by making minor tweaks. Here’s how:
Transfer Money Into a High-Yield Savings Account
Simply moving your money into another savings account that pays more in interest fees could help you more speedily reach your savings goal. What should you look for? You’ll want to poke around for a high-percentage yield (APY) account.
You can find a high-yield account at both online and brick-and-mortar banks. These financial institutions can offer anywhere from 2.0% to up to 2.5% APY. I know, a 2% interest rate is barely keeping up with inflation. But if you’re going to stash money in a savings account, you might as well put it somewhere where it’ll earn more than the average national rate of 0.09%.
So let’s say you put $5,000 in an account that offers an APY of 0.09%. If you sock away $50 a month into that account, after a year you’ll have $5,604.77. But if you put that same amount of money into an account that bears, say, 2.02%, that money will grow to $5,708.11. By making a small change, you’ll earn $100 more a year.
Before you decide to park your money in another bank, look closely at the rules. Do you need to make a minimum deposit, hit a minimum number of transactions each month, or opt for paperless statements? Make sure the requirements work for your situation and won’t undermine your attempts to save.
Separate Your Fixed and Variable Expenses
I’ve previously written about budgeting weekly, and starting your budget on a day that works best for you. But it’s also helpful to separate your fixed and variable expenses. Fixed are the expenses that don’t change in amount every month — rent, utilities, subscription services, and the internet. Variable expenses are things you spend on that could change month to month — think: groceries, entertainment, clothes, personal items, and so forth.
Automating your savings is easiest when you divvy up your fixed and variable expenses. You can do so by parsing out how much you need to cover your fixed expenses, and setting it aside on a debit card. You’ll know exactly how much you have to spend on variable expenses each week. So if you have $350 to spend on variable expenses such as groceries, eating out, and clothes, you can set aside an amount from that $350 to go toward your savings. The rest you can use on everyday expenses and purchases.
Automate your Savings
I will forever preach the “set it and forget it” approach. Some money nerds think that automation makes you lazy. But in my experience, it removes a lot of decision fatigue that could prevent you from saving in the first place.
You don’t have to quibble about whether you can afford to put away that money; you’ve already committed ahead of time. Yes, you still have student loan debt looming over your head, and other financial commitments and goals. But the worst thing likely to happen is that you have to make modifications down the line.
If you’re looking to save $3,000 in six months, you’ll need to save $118.20 a week. Aiming for $6,000 in that same amount of time? You’ll want to save $236.40 a week.
Set Up a Splurge Fund
Even if you’re barely making ends meet, it’s important to set up a splurge fund — instead of denying your impulse to splurge, embrace it. I firmly believe that a splurge fund can save your budget. You can set one up by slashing your expenses or taking on a side hustle. Opportune times to take on extra work are when people are having fun or on vacation — such as during football season, or over the holidays.
First, create a savings account just for money that you can spend on whatever you please. Then, if you’re intentionally saving on a certain spending area — eating out, drinking at bars, buying clothes — make sure to tuck away however much you save. So if you decide to stay in and cook instead of going out to dinner, and save $30, put $30 away for a future treat. Your conscious, deliberate spending decisions should reap instant benefits.
Consider a Balance Transfer
To save on interest fees, consider transferring your existing balance on a credit card to one with a zero percent APR introductory rate. The introductory rate for such cards typically lasts anywhere from six to 21 months. During that time you won’t have to pay any interest fees on your balance. The goal is to ideally pay off the remainder of your balance before the intro rate ends.
Sold on the idea? Not so quick. Before you opt for a transfer, know what the balance transfer fee will be. It’s typically a percentage of your balance. What’s more, you’ll want to know what the APR is after the introductory period ends.
If for some reason you’re unable to pay off the balance before the intro rate ends, you’ll be on the hook for a balance on a card with a potentially higher balance than your old card. Bottom line: While you’ll be wowed at the thought of not having to pay any interest for a period of time, scour through the fine print to make sure you know what you’re agreeing to.
It can feel like a near-impossible feat to save when you’re saddled with debt and other financial burdens. But it’s more doable than you might think — little tweaks here and there can make a big difference in the long run.
Jackie Lam is a personal finance writer. Her work has appeared in Investopedia, Magnify Money and The Bold Italic, and she’s been featured in Money, Kiplinger, Forbes and Woman’s Day. She runs heyfreelancer.com, a blog to help freelancers and artists with their money, and to balance their passion projects and careers.