How to Manage and Maximize Your Savings

Saving money can be overwhelming, especially when there are so many things to save for: vacations, a gorgeous new sofa, retirement, and, oh yeah, an emergency fund.

With all of your long and short-term savings goals floating around, simply throwing a bit of money into a savings account every month can seem like the easiest, most hassle-free option. However, with some careful planning and strategic goal setting, you can actually maximize your savings and reach those goals sooner. We’re here to help, so read on for how to maximize your savings.

 

Establish realistic goals.

As with anything, mapping out goals can make them feel much more manageable. Get started by dividing your goals into three separate buckets: short, medium, and long-term goals. Then, prioritize your needs and wants. You should plan to tackle necessary plans for your emergency fund, retirement fund, and debt repayment first, then determine how much you can spend on other goals, like travel and a down payment for property.

Once you have written down your goals, assign each a timeline. Next, determine how much you will need to save each month to meet those objectives. Take a look at the numbers—are they realistic?

While it’s great to be ambitious with your savings, it’s also important to establish a budget you can stick to. Saving is a lot like painting a portrait: You should start with a basic outline, then continually fill in smaller and smaller details.

 

Create mini rewards and challenges.

If you have trouble staying on track with a savings plan, make room in your budget to include mini rewards for yourself. For example: “If I am able to meet my saving goals three months in a row, I’ll allow myself to add an extra $50 to my clothing budget.” But be sure to include the cost of these motivators in your overall savings plan to ensure these personal bonuses won’t derail long-term goals.

Additionally, in an effort to up my savings game, I set a different savings challenge for myself every month. For example, challenge yourself to 30 days of bringing lunch to work, skipping Uber in favor of walking or public transportation, or denote one month where you only shop your own closet. You’ll be surprised at how much you can save and the good habits that just may stick.

 

Automate and separate your savings.

Saving really works best if you don’t have to think about it. Having money deposited directly from your paycheck into your savings account makes saving money predictable, and prevents you from procrastinating or just plain forgetting. For most people, out of sight really does mean out of mind.

If you find yourself dipping into savings to cover the cost of those great new sandals or an impromptu weekend getaway, move your savings account to another bank, or better yet, a trusted online only bank. The extra time and effort it takes to move those funds will force you to really think about your choice.

 

Start earning interest.

After you have created a manageable plan, it’s time to maximize savings through interest earnings. While interest rates are definitely low, it’s still important to recognize that every dollar you earn in interest is another dollar closer to your goal.

Speaking with a banker or financial professional about your specific situation is always a smart idea before creating a personalized savings plan, but some great savings options include:

 

High-Yield Savings Account (HYSA)

 

A HYSA is a great place to stash cash for short-term goals (vacations, upcoming major purchases) and long-term emergencies (job loss). Similar to a traditional savings account, a HYSA is typically FDIC insured—meaning you won’t lose money (even if your bank goes out of business). But know that interest rates can be much higher than with a traditional savings account.

Your local bank may be great for basic checking and savings accounts but when it comes to getting the best interest rate, look online. Online banks tend to offer better rates for HYSAs than brick-and-mortar banks. Many online banks don’t have a minimum balance requirement, giving you one less thing to worry about.

However, the major drawback of an online bank is that it can take several days for you to retrive money, so it is important to keep enough money in a checking and traditional savings account to cover any immediate emergencies.

 

Certificate of Deposit (CD)

 

CDs are a saving vehicle offered by most banks with virtually no risk. Like a savings account, CDs offer a set interest rate. However, unlike a savings account, you cannot withdraw your money whenever you want. In fact, you’ll actually face penalties for withdrawing money before the CD has matured.

If you have trouble keeping your hands off your savings, this may provide the extra motivation to let your money grow. Be sure to shop around and find the best interest rate for the best timeframe that serves your lifestyle.

 

Investments

 

I’m often asked about investing and the conversations usually involve stories about a friend of a friend who struck it rich with a risky investment. Whatever your investment goal may be—from simply building wealth to taking a chance and getting lucky—investing is inherently the riskiest way to maximize your savings.

There is always the possibility of loss, so never invest money you can’t afford to lose. Remember, experts say you should plan to keep money invested for at least five years to mitigate the risk and balance out any fees.

Tip: Review our investing series here: part 123, and 4.

 

Automate your Savings and Keep Yourself Accountable

Sticking to your goals can be hard, but technology like the Qapital app makes it easier with customizable rules and automated balance transfers. If splurging on guilty pleasures is your weakness, Qapital can keep you accountable by transferring a penalty payment to your saving account. Trying to kick your savings into high gear? Set up your Qapital app to round up the change from your monthly purchases to the nearest dollar and add it to your savings. Planning your dream vacation? If you stay under budget in a given place, Qapital will transfer the remainder and help you get one step closer to your goal.

Using services like Qapital to schedule regular transfers into your savings account prevents you from procrastinating or just plain forgetting – and makes the process of saving more routine and predictable. For most people, out of sight really means out of mind.

Saving money can be daunting, especially when you’re just starting out. Keep reminders of your goals close—maybe a picture of your dream vacation as your laptop background and a list of goals in your wallet—to help you stay on track. In the end, there truly is no better feeling than reaching your savings goals and feeling secure with finances. The challenge is well worth it!

 

Tell us about your savings goals. What have been your biggest barriers to reaching them?

 

This article was originally published on May 4, 2016.

  • Natalie Gough

    i really love the wallet in the picture – can you tell me where i could find it?

    I have trouble with saving so having it direct deposited from my paycheck really helps. I like the idea of putting it in an account that’s not so easily accessible!

    • disqus_SlsYGwlNRZ

      https://www.mochithings.com/products/19512

      • Natalie Gough

        thank you!!

  • I am ordering that wallet asap. Starting fresh in July. Keeping my receipts and tabs on where my money is spent. I am hopeless at saving and I will be trying to save $50 to $100 every 2 weeks as soon as I get my finances sorted. Love this and thank you so much.

    • I am unable to download the Qapital app as I am in Australia. Do you know if there is something similar for me to download?

  • Breanne

    Another article with a need for a copy editor… I believe you mean “retrieve” not “retrive” under #1.

  • MyNijah Darling

    For anyone interested in this wallet, you can find it on eBay under travel clutch wallet

    Look at this on eBay http://www.ebay.com/itm/122015068136

  • Taste of France

    This is not good advice.
    1. Pay off credit cards. There are few investments out there that earn 18% or whatever your credit cards are charging.
    2. Save first and live on what’s left. Put your money into a savings account, and keep 3 months’ salary there. When you go over that, put it into a no-load, total-market mutual fund or ETF. The best is to find a fund that has a fiduciary responsibility (like Vanguard). That means they can’t screw you. There was legislation to require fiduciary responsibility of all investment advisers, but guess who killed it. So pick your advisers wisely.
    It’s true that in a mutual fund your money won’t be as easy to get to. This is an advantage, actually. If your car breaks down or if you have to move across the country, you can cash out your money (it isn’t an IRA, where you pay a penalty before retirement). But it isn’t like a checking or savings account either.
    Read the advice of Nobel prize winners. Beware of the others.

  • I use the EveryDollar app to budget and track expenses. I am also paying down debt and working hard to earn extra money. The best thing to do is track your expenses and then create a budget that is realistic to your needs. If you normally spend $200 on restaurants or coffee, and you’re finding it hard to save, set a budget for these expenses and limit the amount you spend. If you’re in debt try the snowball method and work toward lowering your overhead. Once my consumer debt is paid off I’m working toward student loans and car payment. Eliminating your monthly obligations to debt opens your budget up to more enjoyable things and less stress!

  • Amy

    Be careful using Qapital – especially when it comes to saving for a house. They were unable to provide me with actual monthly statements and it almost cost us our dream house as we couldn’t prove to our lending bank that the money in Qapital actually came from us. We had to pull together quite the case for the bank using the SCREENSHOTS of my account provided by Qapital’s customer service along with my regular bank showing the money being deposited into the Qapital account. Buying a house is already pretty painful, this made it so much worse.