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Do you have more emergency savings or credit card debt?
If you’ve racked up debt, you’re not alone. A new study from Bankrate found that 36% of Americans are in the same situation.
But increasing your savings is an important step to completely improve your household finances, and the little things matter when it comes to spending and saving.
“Saving money is difficult in any economy, but it’s especially difficult right now,” said Alex Gailey, senior data reporter at Bankrate. “Less than half of Americans can afford an emergency expense of $1,000 or more from their savings.”
According to the latest Bankrate Emergency Savings Survey, nearly one-third of Americans who have fallen behind on their emergency savings say it will take them one to three years to feel like they’re on track.
Almost two-thirds of Americans have the same amount or less in emergency savings than they did this time last year.
So where do you start? Creating a budget is the key to managing your finances.
“It’s not fun to itemize your expenses,” says Jill Fopiano, CEO and president of O’Brien Wealth Partners.
“It’s no fun going back through your credit card and bank statements, but you really need to start by understanding how much cash is coming in and where it’s going. . That will help you come up with a plan to control it to some degree.”
It’s easy to see big purchases, but keep an eye on small items too.
“Check your ATM receipt,” Foppiano says. “When purchasing small items, you often pay with cash rather than a credit card, which makes it difficult to track or even remember.”
She says it’s hard to keep track of the little things because you don’t realize their impact as dramatically.
“It’s like dying with a thousand paperclips. It just erodes money.”
Foppiano recommends taking a close look at your recurring payments, canceling unnecessary or unused subscriptions, cutting back on home delivery food services and tightening up your grocery costs with shopping sales. And once you create a budget, stick to it and start building an emergency fund to provide a safety net for unexpected expenses.
“Emergency funds are really important,” Foppiano says. “And the reality is that during COVID-19, where so many people have lost their jobs, and while there have certainly been government grants to help people, they haven’t necessarily come close to covering the costs. I mean, the world is an uncertain place right now, and there are a lot of variables. So it’s very important to have an emergency fund for three months or so of expenses. ”
Be disciplined to regularly allocate money into savings, even if it’s just a few dollars.
“You could start small and put $5 into a savings account every week. That’s $20 a month. That’s 500 yen over two years. And that’s half of $1,000,” Gary says. “Taking small steps towards saving starts building momentum and motivates you to keep saving more.”
Gary recommends setting up automatic contributions to your savings account and paying yourself first every time you get a paycheck.
“Especially if you’re slowly but surely saving $10 or $20 of money into a high-yield savings account, you don’t really notice it’s gone at first. Again, “This makes the process easier. You don’t have to think about it too much, and by automating your savings, you can pay yourself first,” she says.
If you’re expecting a tax refund this year, use it wisely. Putting that money directly into your savings account is a good way to get your emergency fund up and running quickly. Using your money to pay off debt or save for retirement is also a smart way to spend your money.
This article originally appeared on NBBCoston.com.
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