On your next cold weekend day, set aside some time to snuggle up with your finances. Here are three things you could do (if you haven’t already) to start off the new year right with your finances.
1: Start an account buffer
An account buffer protects you from overdrafting your account, can be used as a mini-emergency savings, and can be seen as a baby step toward a decent emergency savings. Save up one to two weeks of your income for a solid account buffer, and you’ll be well on your way toward a three-to-six-month emergency savings fund.
If saving were easy, more of us would be doing it. In recent years, Americans in particular have become known for their notoriously bad saving habits. If saving is as tough for you, try a combination of these to make things easier:
- Make a commitment now that your next tax return will go toward building your account buffer. Even though the money from your tax return feels like a windfall of money, you earned it, just like the rest of your income. Try saving it for when you really need it.
- Set up a save-until-a-date Goal in your Simple account that puts a small amount of money toward your account buffer every day. Even a dollar or two a day will get you on track. You’ll be saving daily without even trying.
- Ask yourself before every purchase, “Will buying this really make me happy? How will I feel about it next week, next month, and next year?” In our consumption-driven world full of personalized ads, we’re used to buying things—things that we probably don’t need, and might not even want. Happiness from material things you’ve bought will likely diminish much more quickly than experiences with loved ones, pets, and friends. Check in with yourself before getting your card out, especially around the card-happy holiday season.
2: Automate your finances
Automating your finances where it makes sense to can make managing your finances much more efficient, saving you time and potentially money from avoiding fees. First, make sure you set up direct deposit so that your money goes straight to your bank account. If you have a steady stream of income, start by automating your bill payments for bills that cost the same every month, such as your internet bill and your rent or mortgage payment. When you have a decent account buffer built up to protect you from overdrafting, you can start automating more variable bills, such as your water and energy bills.
To make sure you have enough in your account to cover everything, set up some save-now Goals in your Simple account to keep your bill payment money separate from your Safe-to-Spend money. With this setup, managing your finances will be as easy as checking in to make sure everything looks as expected.
3: Revisit (or start) your 401(k)
If you don’t have a 401(k), it’s never too late to start. The earlier you put money into your 401(k), the better, thanks to compound interest. Compound interest means that you’re not only earning interest off of the money you put in, but also off of the interest you’ve made so far. Yes, making interest off of interest is as great as it sounds. That’s why checking in on your 401(k) every once in a while is a good idea.
If you make more money this year than you did last year, you were given a raise, or you have a lot of money sitting in your bank account, you may want to increase the amount of money you’re putting into your 401(k). Even if none of those apply to you, you may want to increase how much money you’re putting toward your 401(k) anyway if you can afford it—because compound interest is too sweet to resist.
Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: Any outbound links in this post will take you away from Simple.com, to external sites in the wilds of the internet; neither Simple nor our partner banks, The Bancorp Bank and BBVA Compass, endorse any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.