Maximize Your Savings: Proven Strategies to Increase Your Savings

Do you want to maximize your savings rate? Do you find yourself dipping into your savings account often for things the money is not intended for? If you have found yourself in any of these situations, then you are like many of us at one point or another.

Take control of your finances by using the following proven strategies that have helped myself and many others grow our savings.

Create a Plan

Creating a savings plan gives you a clearer picture of your finances. When I didn’t have a savings plan, I was all over the place with my money management. I moved money around so often I was confused most of the time, which slowed down my savings rate.

Developing a plan helped me grow my savings. I use a google sheet to create my savings plan. I break down my savings into: emergency fund, sinking fund, brokerage, retirement, and lifestyle.

Your Savings Plan Breakdown

• Emergency Fund. Things happen in life. Plan for them. Take into account how much your expenses are, and set an amount each paycheck to save towards an emergency, such as a job loss.
• Sinking Fund. There are many expenses that we can anticipate – save for those. Break down how much you will need for things like car maintenance, holidays, pets, entertainment, vacation etc., and set an amount aside biweekly or monthly.
• Brokerage. A brokerage account is a tool that you can use to invest for the future.
• Retirement. There are many types of retirement accounts that you can take advantage of – 401k, Roth IRA, Traditional IRA, 457b, 403b, Solo 401k, SEP IRA.
• Lifestyle. Including ‘lifestyle’ in your savings plan, is a great strategy to save for your hobbies, vacations, entertainments etc. I love adventures, so I make sure to allocate part of my paycheck to adventures every month.

I review my savings plan monthly while tracking my progress, just to make sure I am meeting my goals. Remember, things change, so be flexible with your savings plan.

“There are many things money can buy, but the most valuable of all is freedom. Freedom to do what you want and to work for whom you respect.” — J. L. Collins, A Simple Path to Wealth

Automate Your Savings

Automating your savings is a very powerful tool to maximizing your savings. It has really helped me increase my savings rate. If you are not currently automating your savings, run, don’t walk, and get that started.

Benefits to Automating Savings

• You improve your financial habits by learning to live on less.
• Your goals are easier to stick to, because you don’t have to remember to manually complete transfers.
• You reach your goals faster because of consistency in your savings.

How to Automate Your Savings

You can automate transfer into your savings account, your retirement accounts, and your investment accounts.

Many employers allow you to split your paycheck into different accounts. Take advantage of this feature to grow your savings. For most payroll systems, you are able to log in online to assign an amount or percentage of your paycheck to different accounts. I prefer saving a percentage because when my salary increases, my savings rate also increases.

You can also set up automated transfer between a checking account and a savings account on most banks’ app. This allows you to automatically transfer money into a high yield savings account (HYSA). A high yield savings account pays a higher interest rate than your traditional banks.

Automate savings into your investment accounts. You can set a biweekly or monthly amount to be transferred from your checking account to your investment account. This can be done easily online with your investment firm. You can also set up direct deposit from your paycheck to your investment account.

Anytime money is transferred to your investment account, make sure to set a calendar reminder to log in to invest the money after a few days.

Many people make the mistake of letting money just sit there. If your money is not invested, you lose on growth opportunities. Remember, time and compound interest is your best friend.

Enroll in your employer’s retirement accounts – 401k, 403b, 457b etc. When you enroll in your employer’s retirement accounts, the amount you allocate will be automatically taken out of your paycheck. This is a great way to increase your savings.

Tip: Increase your allocation anytime you get a pay raise. Better yet, allocate a percentage of your paycheck, so you automatically increase your savings anytime you get a pay raise. This has been my strategy for a few years now, and it helps prevent lifestyle creep.

If you have a side hustle, don’t forget to allocate a percentage to your Solo 401k or SEP IRA.

Join Financial Challenges

I enjoy financial challenges, because they give you the opportunity to be creative in growing your savings. I have successfully participated in a few financial challenges.

‘No Spend’ Month. A ‘no spend’ month is simply spending money on only essentials in a given month. What will you classify as essentials? Essentials will be things like bills, grocery, debt payment, car repair etc. These will be things you need, and not things you want. The goal is not to deprive yourself of living a ‘happy’ life. The goal is to take a pause, evaluate and reset.

100 Envelope Challenge. This challenge is a fun financial challenge, where you randomly put money from $1 to $100 in a physical envelope or virtual envelope. I love this challenge, because you end up finding creative ways to save money by randomly putting an amount in an envelope. I shared some strategies I have used in the 100 Envelope Challenge here.

52-Week Money Challenge. This was one of the first financial challenges I participated in. With this challenge, at the beginning of the year you will save a $1 in week 1, $2 in Week 2, $3 in Week 3 and so on. By the end of Week 52, you would have saved $1,378.

Plan for Success

There are many reasons why you would want to grow your savings – emergencies, saving for a car, home, retirement, and life. Creating a plan gives you control over your finances. When you create a plan, you tell your money where to go.

Automating your savings will propel your savings rate. Give it a go!

I have found financial challenges to be fun and effective. If you are ready to have fun growing your savings, get my Interactive Google Sheet Tracker for your 100-Envelope Challenge.