How to Turbocharge Your Savings (Even on a Modest Salary)

By Lynnette Khalfani-Cox, The Money Coach®      

“I can’t afford to save because I have too many bills!”

“Saving money is too hard because I don’t earn a lot of money to begin with.”

“I can never save consistently because something unexpected always comes up.”

Have you ever said or thought something like one of the expressions above?

If it seems too difficult — or maybe even downright impossible — to save money on a regular basis, perhaps you need to try to a few new strategies. Here are two techniques to turbocharge your savings, even if you earn a modest salary.

Tip #1: Use the “micro” savings strategy

The micro savings strategy is all about breaking down a macro, or big, savings goal into a “micro” goal, one that is smaller, more realistic and financially feasible. Instead of starting with a major savings goal — something like “I want to save $5,000 to $10,000 this year,” break that down into more bite-sized objectives that will get you closer to your overall goal.

For instance, you might start saving $100 per paycheck as a starting point and see how comfortable and routine you can make that savings. If you do it for two or three months with no problem, little by little you might gradually boost your savings, in dollar or percentage terms. You can increase your savings by $50, for example, and then save that increased amount for another three months.

To become a more disciplined, consistent saver, it’s more important that you get into the habit of saving money — as opposed to making a big proclamation about stashing away large sums of cash, and then falling short of that goal.

(See related content: Secrets to Building an Emergency Fund)

Tip #2: Take advantage of OPM (Other People’s Money)

Another way to turbo-charge your savings is to leverage OPM or Other People’s Money, where possible. This tip isn’t to suggest you become financially dependent on others. Rather, this strategy refers to you utilizing various financial perks for which you may be eligible, but you are not currently tapping into for one reason or another.

On the job, for instance, you should be taking advantage of any matching contribution your employer offers via your retirement plan.

In 2018, the maximum you can put into a 401k or 403b retirement plan is $18,500 plus another $6,000 “catch up” contribution if you’re age 50 and older. Your employer can then add as much as $36,500 in matching and profit sharing contributions. With so much money at stake, it’s foolish not to contribute as much as you can to your retirement plan, if only to get the match. That’s “free” money from your job.

But think beyond your retirement benefits. Are there other perks being offered at work that you could tap into — and thereby save money? Your employer may offer free or discounted parking, public transit assistance, or the ability for you to telecommute; all of these options can cut your transportation costs. Other benefits could include educational stipends; financial, legal or personal/family counseling; as well as help for your aging parents. Again, each of these support programs can help put dollars directly back into your pocket, increasing your ability to save money.

Finally, don’t forget about Uncle Sam. Whenever you take of each and every tax deduction or tax credit to which you are legally entitled, you’re saving money there as well. As the old saying goes: “It’s not about what you make; it’s about what you keep!”

 

 

This article is for information purposes only. Please consult a qualified tax professional for tax advice on your specific situation.

 

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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.

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