You don’t have to be a high earner to build a rainy-day fund — you just need to learn how to save money. According to a GOBankingRates survey, as of 2019, 69% of Americans had less than $1,000 in savings. Another study showed that 64% of Americans had less than $10,000 put away for retirement.
During the coronavirus pandemic, many people have lost their jobs, while others have taken drastic pay cuts. It’s important to think of ways to put aside money even during the good times — you never know when things will take a turn for the worse.
How To Save Money During COVID-19
Tough economic times call for a more concerted effort toward saving even a few extra dollars. Follow these tips to cut costs and keep as much money in your pocket as possible.
Coupons often come in small denominations and don’t always seem like much. But some are for larger amounts, and even the smaller ones add up to significant savings. To get started:
- Check the Sunday paper for coupons.
- Search the internet for coupon or promo codes before you click the “Submit Payment” button when buying online.
- Sign up to receive your favorite online retailers’ deals and promotions.
Only buy what you need, and make sure to pay less than before.
Buy in Bulk
Buying in bulk could help you save money when you shop. You can sign up for memberships at your local Costco, BJ’s Wholesale Club or Sam’s Club, where basic members pay $45-$60 annually.
Also, at your local supermarket, take advantage of multiple-item sales and size discounts if the price per pound/ounce is lower.
Prepare Your Own Food
Planning and preparing meals ahead of time saves the money you would have spent on restaurant meals. Use a worksheet like this one from ChooseMyPlate.gov to plan your meals, then shop for just what you need and prepare in advance by making meals you can easily heat and serve.
Set Up Recurring Transfers to Savings
If you have any money coming in regularly, siphon off even a small amount periodically and set up automatic transfers to your savings account.
Saving even a dollar per week adds up to $52 yearly. Whether you can do $2, $20 or more weekly, your account will begin to grow as soon as you set up those transfers.
Cut Back on Subscriptions
According to a 2019 GOBankingRates survey, the average American wastes $348 a year on entertainment subscriptions they don’t use. If you can cut back on unused subscriptions, the savings will add up.
To maximize your savings, follow these steps:
- Go through your last few months’ bank statements and credit card bills.
- Check for subscription payments.
- Make a list of your subscriptions.
- Decide which subscriptions you can do without.
The same applies to your gym and yoga memberships. If you aren’t using them regularly or your club has been closed, check if your payments have been suspended. By being diligent, you’re sure to save some money on your monthly bills.
Cut Back on Unnecessary Expenses
Think twice before you spend money. If you don’t absolutely need a new digital camera, don’t buy one.
Individual expenses don’t seem like much, but they add up over time. Being prudent with your spending can save a significant amount of money.
Earn Cash Back on Your Purchases
Various credit card companies offer rewards such as travel benefits, gift cards and even cash for every dollar spent. A 2018 J.D. Power study found that credit card companies are upping the rewards ante to attract new customers because 47% of cardholders who switched cards did so to reap better rewards.
Earning cash through credit card spending is a great way to bring in extra money, but it’s only worthwhile if you can pay your balances in full at the end of each month to avoid paying interest.
You can also start using apps such as Rakuten, BeFrugal or ShopAtHome, where you can get cash back while shopping at thousands of online retailers.
Rework Student Loan and Credit Card Interest Rates
Reducing credit card or student loan interest rates might be as simple as doing a balance transfer to a lower-interest card or asking your bank for a rate reduction. Also, ask them if they are willing to lower your payments, or if they could halt your payments temporarily to give you a chance to catch up.
Good To Know
Negotiating your interest rates isn’t the only way to capitalize on lower rates. You can also pay off debt by consolidating with a lower-interest personal loan.
Pay Off Current Debt
If you have the funds to pay your debts in full, doing so can help you save money on interest charges. Even if you can’t pay them all off, paying as much as you can will help reduce how much interest accrues.
Avoid New Debt
Make sure not to swipe more on your credit card than you can pay at the end of the month, and don’t borrow money to buy something that’s not within your means. Increased debt leads to paying interest, which will make it harder for you to build your savings.
Reevaluate Your Budget
Pay attention to where your money goes by reevaluating your budget periodically. Here’s how:
- Create a comprehensive list of your income and expenses.
- Determine if you’re running a deficit.
- Review your expenditures to decide what you deem unnecessary.
Even if you aren’t in the red, being in tune with your spending helps you save money.
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Where To Focus Your Savings During COVID-19
If you already have some money in savings, here are a few things you can do with your extra cash.
A 401(k) is a plan where employees deduct money from their paycheck and place it in a retirement account. Employers may also contribute to their employees’ 401(k)s. This option is great if you can spare the funds because the money you set aside is tax deductible.
Unlike 401(k)s, traditional individual retirement accounts are not employer-based. You can place $6,000 or $7,000 — depending on your age — of income into a retirement account every year before tax time. The money isn’t taxed, but you pay taxes when you withdraw funds upon retirement. You’re required to begin withdrawing money from your IRA the year after you turn 72.
A Roth IRA is similar to a traditional IRA. The primary difference is that Roth IRA funds are taxed before they go into the retirement account, not upon withdrawal. There is no mandatory withdrawal requirement at age 72 with a Roth IRA.
If you know how to save money, you should set aside some cash for future use. A high-yield savings account is an excellent place to keep these funds. These accounts typically earn more interest than ordinary savings accounts — hence the name — so your money can continue to increase while in the bank.
Invest In Short-Term CDs
Use short-term certificates of deposit because they typically offer higher interest rates than savings accounts. If you withdraw money from a CD prematurely, you could incur a penalty, making you more likely to leave your money alone.
Other Ways To Get Help During COVID-19
In addition to saving money during COVID-19, you could improve your financial situation with the following options.
Contact Your Bank
Your bank might be an excellent resource. Visit your local branch and ask if they can offer:
- Loans to help you as you work to get your finances in order
- Waivers on monthly account fees
- Reduced interest rates on outstanding loan balances
You can also ask if they have any financial advice that might improve your situation.
Credit Counseling Agencies
If you’re in debt and need advice and help to deal with your creditors, reach out to a credit counseling agency. They can:
- Help get your credit back on track
- Negotiate lower interest rates for you
- Work out better payment arrangements with your creditors
- Offer financial education for the future
These agencies have experience dealing with credit situations and can provide guidance and solutions for various issues. Some services are free, whereas you might have to pay for others. Call a few agencies to find out what they offer, and ask if there are any fees associated with their services.
Free Financial Services
You don’t have to pay to get financial services. Many nonprofit agencies offer financial advice free of charge. Some examples include:
Your situation isn’t unique, and there are people out there who are willing to help. These organizations provide valuable advice and guidance to help people regain control of their financial lives.
This article has been updated with additional reporting since its original publication.