Editor's note: This story originally appeared in the summer 2023 issue of ASU Thrive magazine.
Written by Liz Stephens, ’16 BA, ’22 EMPA. Stephens, the content strategist at Desert Financial Credit Union, oversees the development of all external content to help people understand complex financial concepts. She is passionate about the community, empowering people of all ages to make informed decisions and increase their financial literacy and wellness.
Liz Stephens
It might seem daunting after college to start saving money, but doing so will help you build wealth, thanks to the power of compound interest, and allow you to better forecast your future. Here are five easy-to-follow money-saving tips to help you get to financial security.
1. Create a budget.
To create a budget, first, find out what your actual income is after taxes. Search for an online calculator to help you.
Then, subtract your total living expenses from your true income. The typical percentage-based budget recommendation is 50/30/20 for needs, wants and savings, but with rising housing costs, consider other budgets like 70/20/10 and 80/20.
With every paycheck you receive, pay your savings first. The easiest way to do this is via direct deposit or automatic savings.
Every month, take a moment to track and categorize your expenses. You can use a budgeting app or download a template to help you track costs all in one place and identify spending patterns.
2. Cut unnecessary expenses.
If you are looking for more ways to save, examine your spending patterns to see where you can reduce. If you eat out a lot, try cooking at home more. If you have multiple recurring subscriptions, eliminate those least used.
Lastly, ask yourself these questions before taking the plunge and making a purchase:
How often will I use this in the next six months to a year?
Do I want this item, or do I need it?
Making changes to your spending can add up and help you save for your future.
3. Save for emergencies.
Situations like a car repair or a medical bill can wreak havoc on your finances. Set aside monthly money into an emergency fund to avoid debt if an expense pops up.
Depending on your situation, three to six months of living expenses are ideal, but at minimum, aim to save at least $1,000 for an emergency in a high-yield savings account. Putting money aside for emergencies can provide you peace of mind and reduce financial stress.
4. Manage debt.
You might have heard of “good” and “bad” debt. Try to avoid high-interest debt by paying off your credit cards in full each month by the due date.
If you have existing debt, identify areas where you can reduce spending to allocate more money toward paying off the debt. A popular strategy like the snowball — paying off the smallest loans first quickly — is also used to pay down debt.
If you have multiple high-interest debts, consider consolidating for a better interest rate. Debt can be overwhelming and complicated, but do not worry. Ask to speak to someone at your financial institution to get started.
5. Invest in your future.
Different ways exist to begin investing, from real estate to individual stocks to bonds. If you are just starting your career, prioritize your 401(k) or IRA to start taking advantage of compound interest.
In simple terms, compound interest means that you earn interest not only on your initial investment but also on the interest your investment earns over time. Because of this,
putting even a tiny amount of money away every month as early as possible in your career can make a big difference in your bottom line. Additionally, find out if your organization participates in 401(k) matching to help boost your retirement savings. It’s free money.
Before you start investing, research or consult with a financial advisor to ensure you’re making smart investment decisions.
You can use many strategies to save money and build your savings over time. By following these tips, you’re setting yourself up for financial success. Remember, saving money is a journey; small steps can create significant results.
Learn to manage your money effectively
Visit Desert Financial Credit Union online for educational content to increase financial wellness at desertfinancial.com/news-and-knowledge.
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