How to begin expanding your savings account

Saving money can be intimidating and stressful, but it doesn’t have to be hard.

While it may take time to achieve your savings goals, building responsible habits will get you on the right track.

“Everyone’s situation is unique, but I think there are some things that always stand out,” said Chip Snively, a professor of finance at UNC Kenan-Flager Business School.

Here he shares five solid tips to help you save better in 2021 and beyond.

Save first, spend later

We tend to spend money on things and then save the money we have leftover at the end of the month. The problem with that is we’ll always have something to spend money on. Instead, Snively suggests to save first and then scale your lifestyle and standard of living based on the remainder.

“The idea of save first, spend second is to dedicate and prioritize saving and then live off the rest,” Snively said. “That way, you’ll always have saving as a priority.”

Bank your bonuses

When you get a bonus at work, put most of it into your savings.

That doesn’t mean you can’t reward yourself for your hard work with a nice dinner or vacation, but don’t just increase your lifestyle simply because you got a raise. You’ll probably just end up consuming and spending more money.

“Find a comfortable lifestyle for you, and as you get raises, put at least a large percentage of your raise and allocate it to savings,” Snively said. “That will benefit you tremendously over time.”

S.M.A.R.T. goals

It’s important, Snively said, to tie your savings to goals.

“I think one of your goals — for everybody — needs to be thinking about how to start saving for retirement down the road,” Snively said. “While everybody’s situation is different, I would put retirement at the top, and then the rest of it is kind of related to your personal situation.”

Following the S.M.A.R.T acronym, you can create purposeful goals for yourself.

The first part of S.M.A.R.T is to be specific. Make sure there is a dollar amount or percentage to what you’re going to save. Instead of simply saying you want to save some money, be specific on how much money. For example, you could say, “I’m going to save a hundred dollars a month.”

The goal needs to be measurable, either every month, quarter, or any measurable period of time. It also needs to be attainable. Make sure the goal you want to achieve is realistic.

“Don’t set yourself up for failure,” Snively said.

Your goal needs to be relevant for you. Look at your situation and see what fits your lifestyle and plans.

The last part of S.M.A.R.T is time. You could say, “I want to buy a house in five years.” But make sure to put a reasonable timetable on the goal.

“If you can follow these in terms of goal setting for savings, you’ll have way more success than if you just simply say you’re gonna save,” Snively said.

Revisit when things change

You may need to adjust your goals from time to time because of your location, family situation, cost of living or other things that change as you get older. This year and the COVID-19 pandemic is the perfect example, Snively said, with people having to dip into their savings and revisit their savings plans.

“It’s responsible of you to, on a regular basis, reevaluate your savings plans and your goals to make sure they align with where you’re heading and where the environment is,” he said.

Snively has personally used the same Excel spreadsheet for over 30 years and recommends physically writing down your goals so that you can revisit them. It may be beneficial to talk to a trusted advisor, parent or friend to keep you accountable as well.

Start early

When you’re young, you have the benefit of time.

Snively advises that if you’re younger and you lose your savings, you may be behind a little, but you still have a lot of time to make it up before things get dire. So, the earlier you get started, the more flexibility you have in your savings.

“Young people have the financial gift of time,” Snively said. “Save early and save often.”