If You Have Less Than $5K in Savings, These 5 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 five tips to get the ball rolling, and start building up your savings so you can breathe a little easier.
1. Let This Company Pay off Your Credit Cards
When you think about how much debt you have, you might feel a little anxious.
That’s where a company like Fiona can be helpful. It can help you find personalized lending options to refinance or consolidate your debt to potentially save thousands of dollars in interest.
Fiona will show you all the lenders willing to help you pay off your credit card and eliminate the headache of paying bills by allowing you to make one payment each month.
If your credit score is at least 620, you can borrow up to $100,000 (no collateral needed) and compare interest rates, which start at 4.99%. The idea is to secure a loan at a lower interest rate, potentially helping you save thousands. Repayment plans range from 24 to 84 months.
Take, for example, Katherine, who faced $12,000 in credit card debt. Holding her back? The 15.24% interest rate. By refinancing with a 5%-interest, seven-year personal loan, she saved $12,000 in interest.
If she’d kept on the same road, she would have paid something like $14,000 in interest alone over 25 years. Yikes.
So even if you’re simply curious about what’s out there, know that checking rates on Fiona won’t hurt your credit score — and can probably save you in interest.
Money you don’t spend on that interest is money you can put toward your savings. Then it can earn interest for you. Switcheroo!
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. 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.
4. Be the Change You Want by Investing Change
Wouldn’t it be nice if you could just start saving without even really trying? You can.
If you like easy, consider starting an investment account through Acorns.
You can start small and stack up change over time with its “round-up” feature. That means if you spend $10.23 at the grocery store, 77 cents gets dropped into your Acorns account.
Then, the app does the whole investing thing for you.
The idea is you won’t miss the digital pocket change, and the automatic savings stack up faster than you’d think. For example, we reviewed how Penny Hoarder Dana Sitar was able to save at a rate of $420 a year!
At that rate, you could set aside $1,000 in about two and a half years — without trying.
The app is $1 a month for balances under $1 million, and you’ll get a $5 bonus when you sign up.
Saving doesn’t get any easier than that.
5. 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.