If you’ve had a tough time saving money in the past, you aren’t alone. Bankrate released a study in 2016 indicating that one in six households with annual income between $50,000 and $75,000 have no emergency savings. More than half of households with annual income below $30,000 have no savings. This is the same study that showed half of all Americans couldn’t handle a $400 unexpected expense without borrowing money or selling something.

Two  women discussing suggestions for savingWhile financial advisors say you should have six months’ worth of expenses set aside for emergencies, that number is out of reach for many households. Starting small is not only acceptable, it increases the chances that you’ll be able to stick with your savings plan.

The biggest barrier to saving money isn’t a lack of income. Even people who have very little money can save a few dollars here and there if they decide it’s important. Your chances of succeeding greatly increase if you can automate your savings.

Employer 401(k) plan

If you aren’t contributing to your employer-sponsored 401(k) plan, you can start with 1% without having to endure a lower paycheck. In fact, since the recent changes to tax law, your paychecks may have increased. Now is a great time to start saving for your future. Increase your contributions by just 1% each year and you’ll see your nest egg grow over time.

If your employer matches a certain amount of your contribution, set your percentage at the level that gets you the maximum match. For example, if your employer matches your contribution at 50% up to 3% of your paycheck, and you contribute 3%, you are really getting 4.5%.

Increase the size of your paycheck to create an emergency fund

If you received a tax refund, or expect to, you can adjust your federal tax withholding level by talking to your boss or someone in human resources. Receiving a tax refund actually means you paid too much tax during the year. Ideally, you wouldn’t want to pay taxes or get a refund at the end of the year. Adjusting your withholdings will actually give you the money you would have received as a refund and spread it out throughout the year. Simply fill out a new withholding form. It may take one or two pay cycles to go into effect, but it’s a quick and easy way to give yourself a raise. Just be sure you aren’t withdrawing to little, which would cause you to owe come tax time. Use this extra income during the year to create or add to your emergency fund.

Balance saving money and paying down debt

While it’s important to pay down debts to minimize the amount of interest you’ll pay, it’s also important to save money. Having even a small amount of money set aside for seasonal expenses and unexpected problems will help you feel more in control of your finances.

One way to balance saving money with paying down debt is to decide ahead of time how you’ll spend unexpected income. When you have extra money, it can be tempting to go out and spend it on something that is not necessary. But, if you resolve to save 50% of it, use 25% to pay down debt, and spend 25%, you’ll move closer to your financial goals without feeling deprived.

Everyone’s financial situation is different, of course. With some thought and planning, you don’t have to overhaul your spending or make sweeping changes to give yourself the advantage of having a bit of money set aside for the future.

April 17, 2018
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