The pandemic created a lot of uncertainty for people, especially when it comes to their finances: unemployment was up, spending was down and pretty much everything felt like a roller coaster. One year after much of the world shut down due to the coronavirus, it’s time to rebuild your savings to unlock opportunities for you and your family.
But how do you prioritize saving when you, like many Americans, are living paycheck to paycheck? Or you have other debts? Or you really want to buy that big-ticket item you’ve been eyeing? Credit Sesame has some tips to help you open new doors and reach your goals through saving.
Cut the fat and extra fees
Start by reviewing your budget. First and foremost, identify your essential needs — these include your living expenses like housing (rent or mortgage payments), food, utilities and basic transportation. Next, take stock of all your recurring monthly expenses and review your credit card statements for things like subscriptions you’re not currently using or could live without (do you really need Netflix, Hulu and Disney?). No matter the economic environment, you should prioritize your finances in the same way.
Another area to review where you may be overspending is your bank account. According to fintech company Stilt, consumers paid $11.6 billion in bank fees — including overdraft and ATM fees — within the first three months of the pandemic. If your bank is currently charging you to access your own money, consider switching to a no-fee online bank like Sesame Cash where you have no minimum deposit, no overdraft fees and free withdrawals at over 55,000 ATMs worldwide.
Once your needs are met and you’ve identified how much money you have to allocate to other expenses, you can focus on building up your savings, paying down debts and splurging for the occasional “want” like dining out or a new phone or car.
Establish a savings routine
Building your savings is the best way to prepare for the future and set you and your family up for success. Having a savings account can act as an emergency fund that can keep you financially stable when unexpected costs or emergencies arise — whether that’s a sudden job loss or essential car repairs — and save you from racking up debt. Saving isn’t easy and it can take time to build up a nest egg that will open new doors for you, so it’s important to start right away.
Make sure to pay your bills on time and cover your essentials first. Missing bill payments can have a detrimental effect on your credit score, which can result in you paying higher interest rates in the future, so making at least the minimum monthly payment on your bills is number one. If you have any money left over, you can start to set even small amounts aside into a savings account. You can also set up auto deposits to transfer a set amount of money every week from your checking account into your savings account so you can save without having to think about it.
Start small and celebrate wins
It’s OK to start small — even saving $2 a day will pay off and net you $728 at the end of one year. If you can save $50 a week, you will have saved $2600 in a year. It’s important to celebrate your milestones along the way and set achievable goals — from your first $100 saved to your first month of saving consistently.
It’s also important to make sure your savings are accessible if you need them for an emergency — try looking into a high-yield savings account to store your money. A general rule of thumb is to work to build enough funds to cover a 6-month period of rent, utilities, car payments and other financial commitments. This number may seem daunting, so start with smaller goals to save your first $500, $1,000 and beyond.
Don’t forget about your credit
Your credit and cash are inseparable when it comes to your financial health. Paying your mortgage or rent and bills on time keeps your credit score healthy, which opens up doors for better credit card offers and lower interest rates on everything from your car payment to credit cards, saving you money in the long run. If you have a good credit score and a history of making on-time payments, asking your bank to increase your credit limit could also give you more access funds, or at least give you a buffer if you need it.
Look into resources like Credit Sesame’s free Sesame Cash online bank account and debit card that can help you start earning cash — up to $100 — when your credit score goes up. Discounts and cashback rewards can also help you stow away money for saving: Credit Sesame, for instance, offers up to 15 percent instant cash back from thousands of restaurants and retailers when you use your debit card. This way, you are improving your credit score and saving for the future. And if you connect your employer or IRS direct deposit (including your tax returns and future stimulus checks) to your Sesame Cash account, you can get paid up to two days early.
Keep an eye on the prize
Saving money isn’t easy, and it’s not exactly fun — but as the world continues to reopen after a year of lockdown, saving now can set you up for that vacation, bigger purchase or return to “normal spending” once it’s safe to do so.
To find out more about how Credit Sesame can help you rebuild your savings to unlock new opportunities, visit creditsesame.com.