The fallout of the COVID-19 pandemic has made the need for a healthy savings account clearer than ever. Even before the pandemic, the U.S. Federal Reserve estimated that nearly 40 percent of Americans didn't have enough set aside to cover an unplanned $400 expense.1 But how can you set aside funds for a rainy day without stretching your budget beyond its limits?
Take Advantage of Free Money
Free money is all around you—from a 401(k) match to employer-provided transportation benefits to credit card rewards, there are plenty of ways to put a few extra dollars in your wallet without getting a second job. By looking for opportunities to collect this free money and being diligent in setting aside the extra you do get, you'll be able to increase your savings without impacting your lifestyle. And much of this free money, including 401(k) matches and credit card rewards, is also tax-free, providing you with even more savings.2
Pay Yourself First
One common mistake savers make is to plan to save whatever is left after bills are paid. But when an unexpected expense or good deal comes up before these funds have been set aside, even the best-laid savings plans can fail. Instead, pay yourself first to ensure that your savings goals are met. You can accomplish this by setting up an auto-transfer from your checking account, diverting part of your paycheck into an online savings account, or even going the old-fashioned piggy bank route. Some bank accounts also allow you to round up each purchase to the nearest dollar, allowing these pennies to add up over time.
Boost Your Income
Although cutting the extras from your budget can provide you with a bit more to put toward savings, earning extra money can help you meet your goals without requiring you to cut back. From adding gigs like food and grocery delivery or ridesharing to your schedule to earning passive income through blog advertisements, boosting the amount coming in each month can make it much easier to save. You may decide to keep these extra sources of income in your life or make them more short-term to help you reach a specific savings goal.
You don't need to get a second job to increase your income. If it's been a while since you decluttered your house, it may be worthwhile to start listing items on local garage sale sites or auction sites. Even if you only earn an extra hundred or two a month, over time, this can help improve your financial security.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.