If you’ve scrolled through Instagram recently, you likely don’t need us to remind you that 2020 isn’t just the start of another year — but a new decade. With any lap around the sun, professionals feel energized to make new goals for the promise of opportunity ahead. If you’ve landed that promotion and salary bump (go you!) — but you’ve yet to be strategic about your savings aspirations, consider this your wakeup call to get started ASAP. Experts agree that — generally speaking — those who earn six figures can easily save $30,000 (yep, you read that right) in a year. Though this figure is dependent on the amount of debt and expenses you have, and your location, following a simple math equation, can guide your allocations.
Financial expert and CEO of Coastal Wealth Jeremy Straub explains the recommendation for anyone is 50% of your income to needs, 30% to your wants and 20% to paying down your debts. “If you are making more than $100,000, you will need to cut down on your wants and increase your savings,” he shares.
But can it be done? Yep. Here’s how.
Commit to $576.92 savings a week
Before your jaw hits the floor, stick with us for a second: depending on where you’re located, your take-home pay will shift. After all, the high percentage in New York will sound ridiculous to a professional who doesn’t pay income tax in Texas. To make it to $30K, you’ll need to set aside around $576-ish a week. And the trick to doing this is pretending as if the money never existed, according to CPA Robert Gauvreau. “The psychology of spending would suggest that people who have money in their accounts will spend it because they can. However, the trick is to get the money out of there weekly,” he explains. “When you make regular and frequent transfers, you become accustomed to utilizing your remaining money to support your lifestyle.”
Make a budget
Since you will be left with much less money to spend each paycheck, you’ll need to restructure how you sparse out funds to your various bills and expenses. Julie Ramhold, a consumer analyst for DealNews.com says crafting a budget is the most important part of meeting this hefty savings goal since you can accurately see your spending habits. Whether you use an app or a spreadsheet, be honest — and track everything so you can identify areas where adjustments can be made. “Maybe you’ve budgeted $150 per week for groceries, but you find yourself consistently spending $250: this is a sign you either need to reevaluate your budget or change your shopping habits,” she explains.
If a huge financial change makes you feel uneasy, take a deep breath and follow Ramhold’s advice of creating a transition budget instead. “This means making small changes in your budgets a little at a time so that you form good habits and stick with it better than just jumping in all at once,” she explains.
Negotiate for a lower loan rate
For many Americans, the pink elephant in their savings account is their big ‘ol student loans. Or a whopping mortgage or reoccurring car payment. Though many are afraid to question what they owe, the CEO of Sunrise Banks, David Reiling says you shouldn’t be nervous to refinance or ask for a lower rate. “If you have a five-year loan and refinance it after two years, refinance the new loan only for three years,” he explains. “Doing this makes sure you aren’t just spreading the payment out longer for a ‘perceived’ savings, and are actually taking advantage of refinancing for a lower rate.”
Bring in more dough
More professionals than ever have side hustles — and if you haven’t found an additional source of income, it’s time to look into it. Or, if you’re working longer hours (re: overtime) and not being compensated for your efforts, address it with management. It seems simple enough, but the more money you bring in, the more you’ll save. Especially if you choose the right approach. “The best way to go is to deposit these extra inflows of cash into a high-yield savings account. However, high-yield savings accounts often have requirements for minimum balances in order to avoid fees, so you may have to set aside some cash ahead of time before you can open such an account,” she shares.
Watch out for lifestyle creep.
As folks add more zeroes to their income, they don’t automatically tuck more money away in savings. Rather, it becomes harder since you have cash readily available, a phenomenon that Ramhold calls the ‘lifestyle creep.’ “This is an issue that can quickly snowball into living beyond your means. This is something that can be avoided by ensuring all — or at least most — of your income that isn’t earmarked goes directly into the high-yield savings account,” she recommends. “If you aren’t consciously aware of having the money, you’ll be less likely to spend it in the first place. And the high-yield savings account will ensure that you’re earning a decent amount of interest as long as you maintain — or grow — that large balance.”