If You Have Less Than $5K in Savings, These 6 Steps Will Get You There
When you log into your bank account, how do your savings look? Probably not as good as you’d like. It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
If you have less than $5,000 in savings, you have work to do. We’re not judging — we don’t roll like that. We’re here to help. We just don’t want you to have to sell those Elvis-Presley-signed velvet pants you inherited just to pay some lousy plumbing bill. Those pants are sweet.
Try these six tips to get the ball rolling, and start building up your savings so you can breathe a little easier.
1. Find out Whether You’re Paying Too Much for Car Insurance
You’re probably overpaying for car insurance. And how would you know, really?
Have you shopped around lately? Have you compared rates from the 20 largest auto insurers that do business in your area? That sounds kind of difficult and time-consuming, doesn’t it?
Fortunately, a service called Gabi will do it for you, and you don’t even have to fill out any forms. Simply link your insurance account and provide your driver’s license number, and Gabi will go to work.
Once you link your insurance account to Gabi, it will:
- Scan your existing insurance plan.
- Analyze what coverage you have.
- Compare the major insurers’ rates for that same coverage.
- Help you switch on the spot if it finds you a better rate.
Gabi says it finds an average savings of $720 per year for its customers.
It is a true apples-to-apples comparison at the same coverage levels and deductibles you currently have. Once you sign up, you never have to shop again. Gabi’s software has your policy on file and keeps on monitoring for savings as your life changes.
2. Open a Separate Banking Account
Operating everything out of one account can make your finances muddy and contribute undue stress to your money management.
To simplify, open an account dedicated to saving, and put your money to work. One of our favorites is Aspiration — you’ll pay no monthly fees, and you’ll earn up to 2.00% APY on your savings.
You’ll get access to two online-only accounts: one for spending and one for saving. The spending account comes with a debit card that earns 0.5% cash back on all your purchases, plus free ATMs, so you can easily access your money when you need it.
After you open your Aspiration account, use it to split your income:
- Automatically deposit a portion of your income into your spending account, and use that to cover basic expenses like rent and bills, plus fun stuff; like eating out, shopping or going on vacation.
- Deposit what’s left into your Aspiration savings to keep it out of sight and let it grow. You’ll earn 2.00% APY as long you deposit just $1 a month. We recommend squirreling more when you can, but we like that you won’t lose the perk when you can’t.
3. Break up With Your Expensive Cell Phone Provider
Your phone buzzes. It’s your cell phone provider, which might text you more often than some of your friends.
“90% of your data plan has been used,” it kindly informs you. “We’ll add 1GB of shared data to your plan for $15.”
How nice. Just go ahead and add that to my already-enormous cell phone bill.
If you’re sick of of paying your cell phone carrier hundreds of dollars each month, look beyond the so-called Big Four and into the discount carrier Twigby.
That’s what Zak Wilson did. He’d been paying Verizon Wireless about $180 a month for two lines. So he tried Twigby. For both phones, he’s now paying $60 a month.
Plus, new customers get 25% off the first 6 months of service.
4. Automate Your Savings and Watch Your Money Pile up
Life starts to feel a bit dull when all your money goes to bills and responsibilities. You intend to treat yourself, but usually, you don’t wind up getting the things you really want, like those music festival tickets you’ve been eyeing for months.
Instead of being consumed by the paycheck-to-paycheck cycle — the one that doesn’t leave much wiggle room — try a better savings method.
You can automate it with Dobot, a free financial app that helps you visualize your goals and makes it easy for you to save for the things that you care about.
Get started by downloading the app, then connect your checking account. The app’s algorithm will analyze your spending patterns to determine small (and safe!) amounts of money to withdraw into a separate, FDIC-insured savings account.
Bonus: Get a free $5 bonus toward your goals once you complete your first transfer.
The purpose is to boost your financial health, so Dobot won’t ever withdraw too much — it ensures you’re left with enough money to meet your spending needs as you save.
Whether you’re saving for a new apartment or growing your emergency fund for the next (unexpected) storm, this automated strategy can get you there at your own pace. To set it up: Add a photo to visualize your goal, give it a name, note the amount you need and the date you need it by.
Enter your phone number to download Dobot for Apple or Android. And just like that, you’re one step closer to saving money to reach your financial goals.
5. Let This Company Pay off Your Credit Cards
Once you fall behind, you may find yourself getting crushed by credit card interest rates north of 20%. You’ll never catch up that way. You’re spending so much on interest, you’ll never pay off your balances.
If you’re financially treading water like this, it might be worth consolidating and refinancing your debt.
By refinancing an existing loan, you’re taking out a totally new loan, which comes with new terms and (ideally) a lower interest rate. By consolidating your existing loans, you lump all your debt into one big payment, so you’re only making one payment and dealing with one interest rate per month.
Make sense but don’t know where to start? Credible is an online marketplace that offers consumers personalized loan offers. It’s best for borrowers who have good credit scores (think: around 640 or higher), and it lets you quickly compare rates without visiting a bunch of sites.
Rates start at 3.99%, and you can check yours by entering a loan amount here (up to $100,000) and comparing your personalized options in under 90 seconds.
Money you don’t spend on that interest is money you can put toward your savings. Then it can earn interest for you. Switcheroo!
6. Negotiate Your Bills Down
You’re either all about those streaming services, or you couldn’t imagine a world without your favorite cable TV shows. But the price of internet and cable just seems to get higher every year.
You’ve probably heard that calling your cable or internet provider can result in having your bills lowered, but if you’ve ever actually acted on that info, you know how long you can sit on hold — and how incredibly frustrating it can be.
That’s why it’s time to call in a robot.
The negotiation bot Trim will negotiate your cable or internet bills down for you.
It works with Comcast, Time Warner, Charter and other major providers.
You can sign up simply with Facebook or your email address. Then, upload a PDF of your most recent bill, and Trim’s AI-powered system gets to work. If at first it doesn’t succeed, it’ll keep negotiating until it can save you some money.
Also, if you have any outages, Trim believes you deserve a credit, and it’ll handle that for you.
Trim takes 33% of the savings tab, and you get the rest.
Bonus: Maximize Your Tax Refund — Then Boost Your Savings
Is it too much to ask to have one place to do your taxes professionally — regardless of how many deductions and forms you have — for free?
Nope. At least that’s what Credit Karma thinks. You probably know Credit Karma as the website to get your free credit score and find other financial products, and now it’s reinventing how you do your taxes. Its new Credit Karma Tax preparation lets you do your taxes with professional help for free.
From the time you sign up to the time you file, doing your taxes with Credit Karma is completely free. Have a lot of deductions? No problem. Need to talk to a professional to figure things out? Credit Karma can help you out. Want your max refund? It’s guaranteed.
You can even import your taxes from last year to get a head start with its Jumpstart feature.
Don’t let the guy sitting at that card table at the grocery store do your taxes. And don’t blow half of your return on a CPA. Try Credit Karma Tax preparation. It’s completely free, guaranteed accurate and lets you keep your whole refund.
Now you need to decide just how much fun to have with that refund!
Think Small, but Dream Big
It’s tempting to just shrug and say, “I can’t afford to have a savings account.” Sure, you think you’ll plop that $1,500 tax-refund check into savings. But those big windfalls also come with big temptations.
If you can find a way to save just $5 each day, you’ll be $1,825 richer in a year.
Having $5,000 in savings isn’t some magic number, but it’s a great starting point. Use these five tips and you’ll be amazed how fast you can get there. You’ll sleep better knowing you have that cushion.
Then, you’ll start dreaming of $10,000. Am I right?
Disclosure: Clarity Money compensates us when you download the app using the links we provide.