We all need savings on hand for emergencies. In fact, as a general rule, you should have enough money in your savings account to cover at least three months of essential bills.
If you’re starting the new year with $0 to your name, don’t despair. But also, don’t just sit back and do nothing. If you don’t boost your cash reserves, you could wind up in serious hot water if an unplanned bill strikes. Here are five steps you can take to grow your savings this year.
1. Get on a budget
A budget will help you track your spending and see where your money goes every month. And having one could make it easier to identify expenses to cut back on so you can free up more money for savings. You can set up a simple budget using a notebook or spreadsheet. Or, check out these budgeting apps.
2. Arrange for your raise to hit your savings automatically
If you’ve gotten a raise for 2022, that’s money you’re not used to getting. Rather than spend it, it pays to send it into your savings account. In fact, a good bet is to make that process automatic. Arrange to have the extra money in your paycheck go directly into savings, before you have an opportunity to spend it.
3. Refinance your mortgage
If you own a home, your mortgage may be your single largest monthly bill. And if you’re able to reduce that bill by refinancing, you can take the money you’re not spending on housing and put it into savings instead. It pays to refinance your mortgage if your credit score is strong and you can shave around one percentage point or more off of your loan’s interest rate. Reach out to different refinance lenders and see what rate offers they have available if you think it makes sense to swap your existing mortgage for a new one.
4. Consolidate your credit card debt
If you owe money on several credit cards, you may be spending a lot on those monthly payments. That’s why a balance transfer could make sense. That way, you can move your various balances onto a single card — one with a lower interest rate attached to it, thereby making your debt more affordable. The less money you spend on credit card interest, the more you’ll have available to save.
5. Boost your income with a side job
You may only have so much money you can squeeze out of your current monthly paycheck for savings purposes. If that’s the case, consider getting a side gig. There are numerous options to choose from, and that income boost could be your ticket to growing your savings substantially. That said, if you’re going to get a side hustle, be sure to reserve a portion of that income for the IRS if it isn’t automatically taxed so you don’t run into problems later on.
The longer you go without savings, the more financial stress you might experience. If you’re without savings, take these five steps to boost your cash reserves and buy yourself some much-needed peace of mind.
Earn up to 5% back and wipe out interest until 2023
Our in-house credit card expert loves this top credit card pick, which features a 0% intro APR until 2023 that can help you avoid interest charges on new purchases or pay off debt faster using simple balance transfer strategies. Plus, this pick packs in an insane cash back rate of up to 5% with no annual fee. In fact, this card is so good that our credit card expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.