Building a budget is a fundamental way to save smarter. But to do that, you need a basic understanding of fixed and variable expenses—and how they can impact your ability to stick to a budget.
What is a fixed expense?
Fixed expenses stay the same every month. They’re predictable and rarely change, making them easy to plan for.
Examples of a fixed expense include:
Rent or mortgage payment
Child care costs
Phone bill
Internet bill
Loan payments
Subscriptions
Insurance premiums
Tuition bill
You may have different fixed expenses than those listed. Go through your past year’s expenses to make sure you don’t skip anything when making up your budget.
How to budget for fixed expenses
With fixed expenses, you typically know what to include in your budget. These tips can help you create the most effective budget for your situation.
Prioritize essential expenses—the things you need to survive. Make sure your income covers essentials like housing and child-care over wants like gym memberships.
Convert nonmonthly costs into fixed monthly expenses. For example, if you pay $600 twice a year for car insurance, mark that down in your monthly budget as $100.
Add savings into your budget as a fixed expense. Whether you’re saving for unexpected expenses or financial goals like retirement, include it in your budget to ensure it happens.
Start saving with no minimum balance
Discover Bank, Member FDIC
Saving money on fixed expenses
Fixed expenses tend to be bigger and may take planning to reduce—like moving to reduce your monthly rent. Others are easier to cut or trim. To save money on fixed expenses:
Cancel unused subscriptions and memberships
Switch to a cheaper phone or internet plan
Shop around for lower rates on insurance
Avoid unnecessary expenses
What is a variable expense?
Variable expenses change, often monthly, making them less predictable and trickier to budget for. That makes it easier to overspend on them.
Variable expense examples include:
Groceries
Medical bills
Utility bills
Clothing costs
Gasoline prices
Car or home repairs
Some variable expenses are easier to manage than others. For example, you can control what you buy at the grocery store but not how much it costs to fill your gas tank.
How to budget for variable expenses
Like fixed expenses, it’s important to prioritize essential variable expenses like food and utilities. Here are two options to help determine realistic figures for your budget:
Calculate the average of three to six months’ spending in each category.
Determine the highest amount that you spend in a month in each category, and use that maximum number in your budget to provide a cushion.
Either of these methods can help you get a better handle on how much you’re spending on variable expenses. Another tip: Keep a budget buffer in a savings account to provide a safety net when variable expenses are higher than expected (or when unexpected expenses pop up).
Saving money on variable expenses
Reducing variable expenses can free up space in your budget, making it easier to handle your fixed expenses and funnel more into savings.
Here are five simple ways to reduce variable expenses:
Make grocery lists and stick to them.
Wait for sales whenever possible.
Reduce your dining out and takeout orders.
Seek free or low-cost entertainment like local museums that offer discount days and perks.
Invest in a programmable thermostat to save on utilities.
Now that you understand the differences between fixed and variable expenses, you can build a budget that helps you control your spending and meet your financial goals. When you know exactly where your money is going, you can take steps to shed unnecessary expenses, plan for the unexpected, and let your money work harder for you.
Take a proactive approach to planning for fixed and variable expenses with a Discover® Online Savings Account.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
Home renovation is rarely straightforward and always carries the risk of additional costs—and that’s particularly true for those who need accessible home modifications. Whether you need to build an entry ramp or adapt a bathroom, it helps to be aware of funding options that can help homeowners.
About 27% of the U.S. adult population has a disability, according to the Centers for Disease Control and Prevention. And 12% of people with disabilities face a mobility issue that may impact walking, climbing stairs, or getting around the house. The good news: There’s help for millions of people to pay for renovations that make their homes more accessible, whether they have physical disabilities that impact mobility, are deaf or hard of hearing, are blind or have diminished vision, are neurodivergent, or have other disabilities that may require a home modification.
Funding resources can come from federal, state, and local government grants. Other options include private loans and nonprofit funding. This guide can make it easy to find the right funding source to help offset (and potentially cover) the cost of home modifications for accessibility.
Home modification costs at a glance
Starting a home repair project can seem daunting. “Home modifications for accessibility can range from simple changes like installing grab bars in bathrooms to more extensive renovations like widening doorways or installing ramps,” says Ladina Schöpf, founder of a Zurich-based architecture planning firm. “The costs can vary, depending on the scope of the modifications and the specific needs of the individual,” Schöpf says.
From minor modifications (some of which you may be able to handle yourself) to major structural changes, the cost of home remodeling for individuals with motor disabilities can range from less than $100 to more than $60,000.
Here are a few examples of common home modifications for people with disabilities and the average price, according to a disability remodeling cost guide from Fixr, an online resource center focused on home improvement and repair projects.
Install a chairlift: $3,000–$5,000
Build a wheelchair ramp: $1,700–$5,000
Widen a doorway: $300–$2,500
Add grab bars: $85–$300
Install a specialized doorbell (for people with hearing impairments): $50–$500
Add auditory smoke detectors (for people with vision impairments): $70–$150
One of the top sources for grants for home modifications for people with disabilities is the U.S. government, which has several programs to help homeowners cover the cost of their accessible home modifications.
U.S. Department of Agriculture
The U.S. Department of Agriculture (USDA) provides loans and grants for low-income rural residents through its Rural Development program. The maximum loan amount is $40,000, and the maximum grant allowance is $10,000. Loans and grants from this USDA program may be combined for up to $50,000 in assistance for home repairs.
To qualify for the program, applicants must own their home and live in the house. Additionally, homeowners must prove they can’t obtain affordable credit elsewhere if they apply for the Rural Development program, also known as the Section 504 Home Repair program.
Further, this program only applies to single-family homes in select areas. Applicants should first check if their home is in an eligible area on the USDA website. For grants, applicants must be age 62 or older.
U.S. Department of Veteran Affairs
There are also grants available from the U.S. Department of Veteran Affairs. As you might’ve guessed, applications for these grants are limited to veterans and service members with certain service-connected disabilities. Beyond those qualifiers, the grants vary depending on whether the applicant owns (or plans to own) the home being modified. Veterans who don’t own their home but need help modifying it for their disability can still apply for specific grants.
Specially Adapted Housing (SAH) grant. It’s the most significant grant available, as successful applicants can receive up to $117,014 in 2024. This type of grant requires that applicants own or plan to own the home being modified.
Special Home Adaptation (SHA) grant. This grant is designed for veterans with qualifying service-connected disabilities who live in their own home or one owned by a family member. The grant provides up to $23,444 (as of 2024) and doesn’t need to be used within a single calendar year. This flexibility is nice in case future modifications are required.
Temporary Residence Adaptation (TRA) grant. This type of grant caters to veterans and service members in temporary housing arrangements. Veterans need to qualify for either the SAH or SHA grant to apply for the TRA, which differs in that it doesn’t require the grant applicant to own the home and instead covers changes needed when the veteran is temporarily living with a family member. The amount of this grant depends on whether the applicant would qualify for an SAH or an SHA grant: if SAH, then the grant provides up to $47,130 in 2024; if SHA, then the grant provides up to $8,415.
Home Improvements/Structural Alterations grant. This grant provides up to $6,800 to pay for modifications for service-related disabilities and up to $2,000 for other disabilities.
State and local home modification grants
The federal government isn’t the sole funding source for costs associated with home modifications for individuals with disabilities. There are also state and local programs that provide financial assistance when modifying a home for accessibility.
U.S. Department of Housing and Urban Development
The U.S. Department of Housing and Urban Development (HUD) website has a state-by-state breakdown of homeowner assistance programs. Loan amounts and qualifying criteria will vary by state, so it’s best to research your home state to determine how much money is available for homeowners making repairs or modifications for accessibility.
The Independent Living Research Utilization program was started in the late 1970s and, in the decades since, has provided a comprehensive list of resources for people with disabilities who strive to live independently. Like the HUD resource list, this is organized by state and includes local funding options.
The National Directory of Home Modification and Repair Resources has an interactive map with many resources that homeowners can explore while researching funding options.
Nonprofit resources for home modifications
Homeowners can apply for funding from nonprofits as they modify their homes and make them more accessible.
Habitat for Humanity
This nonprofit is well known for building homes for low-income families. The Habitat approach relies on both volunteer workers and the homeowners themselves taking an active role in building for their future through a process known as “sweat equity.” Even though a prospective homeowner’s disability may limit their ability to participate in construction work, Habitat for Humanity has ways for all future homeowners to take an active role through means like homeowner education courses or volunteering at Habitat’s storefronts.
The National Disability Institute
The National Disability Institute is another nonprofit group, and its Assistive Technology Loan Program provides loans up to $45,000 to help pay for hearing and vision aids, communication devices, environmental adaptations, wheelchairs, and home or vehicle modifications for New York and New Jersey residents.
Other financing options for home modifications
Many homebuyers may face headwinds from high interest rates and limited supply, and the added cost of home remodeling for disability modifications compounds the pressures that disabled homebuyers face.
Brady Bridges is a real estate broker/owner in the Fort Worth, Texas area, and he encourages homebuyers to think outside the box if they need additional funding options for home modifications. “In the current housing market climate, the Fannie Mae HomeReady loan program is a viable financing option for home modification for individuals with disabilities,” Bridges says. “Disabled homebuyers who earn less than area median income and with a credit score of 620 or higher can benefit from a low down-payment requirement, as low as 3%,” Bridges says, “with the option to use grants or assistance funds for the entire down payment.”
Every extra bit of financial wiggle room helps in purchasing a new home, and it’s especially useful when budgeting for accessible home remodeling projects that may be required after the home purchase.
Putting it all together
Once you research the price ranges of common accessibility modifications and clarify how much your projects will cost, you can effectively and realistically start to budget for these updates. But you’re not necessarily on your own when it comes to paying for these modifications. There are many funding options for accessible home modifications out there that can lessen the financial burden of making a home comfortable for a differently abled person.
Make a plan to start your project on the right foot and proceed confidently. To kick-start your savings, consider a Discover® savings account, which offers a competitive savings rate with no account fees.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
To answer whether a $40,000 salary is good, you need to consider your perspective. For a recent grad in a small town where the cost of living is low, that might be an annual income that pays the bills. But a $40,000 salary is not typically enough for a household to live comfortably in most parts of the United States. To put it another way, a single person can live more comfortably on a $40,000 salary, but a family — with or without children — may find it more difficult.
Rising inflation has made it more challenging to get by on $40,000 in 2022, but this salary is still far above the United States Census Bureau’s poverty threshold for families of up to six people. The $40,000 figure represents earning more than the federal minimum wage ($7.25/hour).
So is $40,000 a good salary? Well, it depends.
Key Points
• A $40,000 salary may be sufficient for an individual in a low-cost area, but it may not be enough for a family to live comfortably in most parts of the US.
• Rising inflation has made it more challenging to live on a $40,000 salary, but it still exceeds the poverty threshold for families.
• Compared to the median household income in the US, a $40,000 salary falls short, but it can contribute to the median household income when combined with a second income.
• A $40,000 salary translates to a monthly income of $3,333.33, a biweekly paycheck of $1,538.46, and a weekly income of $769.23.
• Living on a $40,000 budget requires careful expense tracking, budgeting, debt management, and saving strategies. Location plays a significant role in how far the salary can stretch.
How Does a $40,000 Salary Compare to the American Median Income?
Here’s a look at how earning a $40,000 annual income compares to that of your fellow Americans.
• According to the U.S. Census Bureau, the median household income in 2020 (when data was gathered) just surpassed $67,500.
• More recently, the Bureau of Labor Statistics determined that the median weekly income of a full-time worker (salary or hourly) was $1,037, or nearly $54,000 a year.
While a $40,000 salary falls short of recent BLS definitions of the median personal income, it could successfully contribute to the Census Bureau’s picture of the median household income, when combined with a second income from a domestic partner.
Could this salary be considered good? Consider the following:
• As an individual, you may find that $40,000 is a good entry-level salary.
• Couples living the DINK lifestyle (which stands for dual income, no kids) and who each make $40,000 would be well above the median household income. Plus, they would have the additional costs of raising children as part of their budget.
$40,000 Salary Breakdown
It can be helpful to know what a $40,000 salary translates to as a monthly budget, weekly paycheck, or even hourly rate. This may help you compare career options and budget wisely, not to mention answer that question, “Is $40K a good salary?”
Here’s how it breaks down:
• Monthly income: $3,333.33
• Biweekly paycheck: $1,538.46
• Weekly income: $769.23
• Daily income: $153.85*
• Hourly income: $19.23**
*Based on 260 working days a year **Based on 2,080 working hours a year
And remember: That’s before taxes. If you are single and make $40,000 a year, your federal tax bracket is at 12%, but you may also owe state, city, and even school district taxes as well. It’s important to keep that in mind as you plan and assess how to pay bills and save with this salary.
Recommended: What to Do When You Get a Pay Raise: 12 Tips
Can You Live Individually on a $40,000 Income?
It is possible to live individually on a $40,000 income. In fact, you may be able to afford the average monthly expenses for a single person and work on your saving and investing goals.
Your location will have the largest impact on how far your dollars will stretch. Areas with a lower cost of living will likely be easier to afford for an individual on a $40,000 income.
As an individual, you can help your salary go further by looking for ways to save money, like:
• Having a roommate or renting out a room in your house if you own one
• Cooking at home instead of eating out
• Buying a used car or, depending on where you live, relying on public transportation
• Finding a higher-yield savings account, ideally over 1.00% APY
Get up to $300 when you bank with SoFi.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!
Best Places to Live on a $40,000 Salary
If you can afford moving expenses and aren’t tied to a specific location for work, you can make your dollars go further more easily in certain locations in the United States. These are places with a lower cost of living. Here are the five cheapest cities to live in the U.S. this year, according to U.S. News:
• Hickory, North Carolina
• Green Bay, Wisconsin
• Huntsville, Alabama
• Quad Cities (Davenport-Bettendorf, Iowa and Moline-Rock Island, Illinois)
• Fort Wayne, Indiana
However, there’s more to moving than just the expenses and the job. Before packing up a rental truck, consider whether you are comfortable leaving behind friends, family, and familiar places.
Recommended: Financial Moves to Make During a Job Transition
Worst Places to Live on a $40,000 Salary
A $40,000 salary might not go far enough in a city with a high cost of living. U.S. News research indicates these are the most expensive cities to live in:
• Los Angeles, California
• Miami, Florida
• San Diego, California
• Salinas, California
• Santa Barbara, California
And if you were expecting to see New York City on this list, don’t worry: It’s not far behind, at number nine.
Tips for Living on a $40,000 Budget
So how can you (and possibly your family) live on a $40,000 budget? It’s important to cut costs, look for deals, pay down your debt, and build up savings for an emergency.
But living on a small salary doesn’t mean you have to completely give up entertainment. Remember that it’s OK to treat yourself to the nice things in life from time to time, as long as they are within reason. Everyone needs some fun in their life.
Here are some important tips for living on a $40,000 budget:
Carefully Tracking Your Expenses
First things first, get an understanding of your current spending habits. Your bank may offer tools that make this easy to analyze or you can download apps or check websites that make this easier.
Consider what bills you have every month, whether they are on auto pay, and, if so, when do they process? (This will help you schedule your bills and avoid getting hit with late fees.) Make a list of all your recurring expenses (mortgage or rent, student loans, car payment, phone, insurance, and utilities), and then analyze how much on average you’re spending on more variable expenses like groceries, gas, clothing, and entertainment.
What can you cut? What bills can you negotiate down? Where can you reallocate money toward savings?
Now that you have an idea of what you’re currently spending, it’s time to design a budget around what you should be spending.
Start by plugging in necessary monthly expenses; these are things you must pay for each month, like your home, insurance, and food. Only once you can see that these basic needs are met should you begin to budget for things like dining out or new clothes, also known as wants vs. needs.
Not sure where to start? Do some online research on how to make a budget. There are different techniques including a line item budget and the 50/30/20 budget rule.
Getting Out of Debt
As you consider how to manage daily life on a $40,000 salary, it’s wise to pay attention to the role that debt plays in your personal finances. Mortgage and student loan debt are structured to be paid off over decades, and can be considered by some to be good debt, as the interest rates are often relatively low and timely payments build your credit history. The rates on credit card debt, however, can be high (currently over 20% on new offers and 16% on existing accounts) and therefore more detrimental to your finances (and mental health). If you have serious credit card debt, it is wise to cut back expenses as much as you can so you can focus on paying off your debt.
You can tackle your debt using the snowball method or the avalanche method. You may also consider a balance-transfer credit card or a debt consolidation program, depending on your situation. A debt counselor who works for a nonprofit, like the National Foundation for Credit Counseling (NFCC ), can be helpful as well.
Saving Your Money
If you are debt-free (house, car, and student loan payments aside) and still have wiggle room in your budget after accounting for necessary expenses and a little bit of fun money, you can allocate some of your $40,000 salary toward your saving goals. These might include vacations, a house down payment, renovations, or a wedding. An emergency savings fund is often a good place to start.
Recommended: How to Save Money from Your Salary
Investing Your Money
After you have gotten a handle on your expenses, designed a budget, and opened a savings account, you might consider if there is enough leftover from your $40,000 salary for investing. This may not be possible if you live in a city or state with a high cost of living.
How can you start investing? If your employer offers a 401(k) match, consider taking advantage of that. It’s basically free money, so contribute enough to snag it.
You can also look for automated investing opportunities so you don’t have to worry about building a portfolio from scratch.
Managing Finances With SoFi
If your $40,000 salary is paid via direct deposit, think about opening a high interest online savings account. With direct deposit, you can get an array of perks from our SoFi Checking and Savings account. You’ll spend and save in one convenient place, plus you’ll earn a competitive APY and pay no fees, which can help your money grow faster. What’s more, qualifying accounts can get paycheck access up to two days early.
Make the most of your money with SoFi.
FAQ
Can you live comfortably on $40,000 a year?
Individuals can often live comfortably on $40,000 a year. Families, however, may struggle with this salary, especially in areas with a higher cost of living.
What can I afford making $40K a year?
If you are an individual living on $40,000 a year in an area with a low to moderate cost of living, you can afford typical monthly expenses like food, housing, and utilities and still have enough for some fun expenditures, like entertainment. If you are frugal and build a budget, you may also be able to pay down debt, build your savings, and even invest a little.
Is $40,000 a year considered middle class?
According to Pew Research, a middle-class family of three makes between $56,000 and $156,000. Families of that size who bring in $40,000 a year would not be considered middle class. However, an individual making $40,000 a year would likely qualify as middle class.
Photo credit: iStock/Prostock-Studio
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Whether you’re funding your first savings account or growing an existing rainy day fund, actually depositing money into your savings should be the easiest part. But if you’re still taking cash or checks to your local bank branch, you might find putting money in your savings to be inconvenient and even time-consuming.
If you’re considering opening an online bank account, especially if that bank doesn’t have a local brick-and-mortar branch, you might wonder how to deposit money into savings accounts that are online. Here’s a look at how to regularly add to an online savings account without ever needing to leave your couch.
Automated deposits from an existing account
Automation is one of the best tools to help you reach your savings goals. By removing the hands-on element of the savings process, you save time and energy and eliminate one of the most common savings hurdles: getting in your own way.
Call it a sunny day fund—online savings with no monthly fees
Discover Bank, Member FDIC
With an online account, such as the Discover® Online Savings Account, you can set up automatic transfers from a linked account (such as your checking account). Once your accounts are linked, you can move money back and forth whenever you want to contribute to savings or withdraw for a special expense.
First, decide how often you want to contribute to your savings account. This decision might be based on a personal savings goal you’ve set or could depend upon your paycheck schedule. Next, think about how much you can afford to save. Keep your account’s cash flow in mind, like when you get paid and when bills are due. Lastly, plan to revisit your automatic savings plan occasionally to make sure you’re saving the right amount and at the right intervals.
Direct deposits
Many employers today offer direct deposit, which electronically puts your paycheck in your bank account. But did you know that you can usually route a portion of your pay into a savings account, too?
With direct deposit, you can allocate a flat dollar amount or even a percentage of your pay into a dedicated online savings account. This often involves speaking with your employer’s HR or payroll department, then filling out a direct deposit form with your savings account information.
Next, choose the dollar amount (or percentage). You’ll get the rest of your paycheck as usual—and grow your savings.
ATM deposits
You may have a regular influx of cash to deposit into your savings account, but visiting a local branch during banking hours may not be possible or convenient. In this case, you might be able to add cash to your account through a network ATM.
Some network ATMs allow you to insert cash using the debit card connected to your checking account. Assuming you maintain checking and savings accounts at the same institution, the machine will ask which account you want to deposit the funds into, then will count your cash and provide a receipt.
The benefits of making ATM deposits to your savings account are that you don’t need to wait in a long line, speak with a teller, or plan your visit around the bank’s business hours. Not all banks or accounts offer this service, though, so check whether your online savings account supports ATM cash deposits.
Can you deposit a check into a savings account?
With mobile check deposits, you can use your phone, web browser, or other connected device to deposit paper checks from anywhere. There’s no need to visit a bank branch or mail your check, and funds can sometimes be available in just minutes.
This process applies to both checking and savings accounts. You can make a mobile check deposit from your phone or other connected device to initially fund your account or add money. Just sign the back of your check, use the bank’s mobile app to take pictures of both sides, confirm the amount, and click “deposit.”
Transfers between accounts
Once you’ve linked another account—whether a Discover checking account or one at another banking institution—you can easily initiate transfers between your accounts. If you have multiple eligible Discover bank accounts, transferring between them is easy and can be done through the mobile app or online.
If you want to transfer from an external bank account into your savings, you should request to link the accounts. This process might take a few days to complete and is typically done through a series of small automated clearing house (ACH) deposits that you’ll confirm. Future transfers between financial institutions might take anywhere from a few hours to a couple of business days, depending on the accounts.
Another option is to make a wire transfer to your savings account from another bank account. Discover doesn’t charge for incoming wire transfers, but a service charge may be associated with domestic or international wires from your outgoing account.
Start adding to your online savings account regularly
Gone are the days of visiting a bank branch to fund your savings account. With a Discover Online Savings Account, you can set up automatic transfers, deposit checks from your mobile phone, arrange transfers from linked accounts, or even accept direct deposits from your employer. And if you’re wondering how to check your savings account online, that’s as simple as logging in on your device. It’s now easier than ever to manage your savings and meet your financial goals in the process.
Want to learn more? Visit the Discover Online Savings Account page to see how an online account can make planning for the future even easier.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.
Have you ever received a payment — such as a dividend check or a bond interest payment — and noticed that 24% of the expected amount was missing? If so, you may be subject to backup withholding.
This tax action can be irritating, but it only applies to certain kinds of payments and is easily fixed by making sure the IRS has correct tax information from you.
Get ready for simple tax filing with a $50 flat fee for every scenario
Powered by
Don’t miss out during the 2024 tax season. Register for a NerdWallet account to gain access to a tax product powered by Column Tax for a flat rate of $50 in 2024, credit score tracking, personalized recommendations, timely alerts, and more.
for a NerdWallet account
What is backup withholding?
Backup withholding is an action where the IRS makes payers, such as banks, deduct a 24% tax from certain kinds of payments to taxpayers who have failed to provide the IRS or payers with needed information and send that amount to the government. It’s a way of ensuring the IRS receives the money it’s owed by potentially uncooperative taxpayers.
There are two ways someone can become subject to backup withholding:
The backup withholding “B” program applies to taxpayers who fail to provide a correct tax identification number (TIN) to entities that pay them — for example, a bank at which they have a high-yield savings account. A TIN can be a Social Security number, an employer identification number or an individual taxpayer identification number. (Payers need a valid TIN from payees so that they can accurately report payments to the payee to the government.)
The backup withholding “C” program applies to taxpayers who have unreported interest or dividend income on their federal tax return, or who have accidentally marked themselves as subject to backup withholding due to previous underreporting of income. (Many investment institutions, such as brokers, are required to ask new users if they’re subject to backup withholding. If a user mistakenly checks that box, they may become subject to it.)
If you’re subject to backup withholding, that 24% deduction counts toward your taxes owed. You may be able to get some of it back if you file a Form 1040 that shows that the amount you’ve paid via backup withholding is greater than the amount you owed for a particular year.
What payments are subject to backup withholding?
Backup withholding can apply to many different kinds of nonpayroll income — typically the kind of things that are reported on a 1099 form, which records passive income and nonsalary work, or a W-2 G form, which records gambling winnings. These include:
Dividends.
1099-K income from credit or debit card payments.
Attorney’s fees and court proceeds, for attorneys.
Patronage dividends from co-op businesses.
Rents, profits and other capital gains.
Payments from brokers.
Royalty payments.
Cash payments from fishing boat operators.
Certain government payments.
Gambling winnings (reported on form W-2 G).
But backup withholding doesn’t apply to all nonpayroll income. Certain kinds of payments are excluded from it, such as:
How do you know if you’re subject to backup withholding?
If you’re subject to backup withholding, you should receive at least one letter notifying you of backup withholding before it starts. But which letter you receive and who it comes from depends on which specific backup withholding program you’re subject to.
Backup withholding “B” program notification
If you’re subject to “B” backup withholding, the payer you failed to provide a valid TIN to will send you notices asking for you to provide the missing information. The IRS, however, will not send you a notice — they will send a notice to the payer, who will then reach out to you.
If you provided an obviously incorrect TIN (e.g., one that doesn’t have enough numbers) or you didn’t provide one at all, backup withholding may begin immediately. For example, if you fail to provide a TIN while signing up for an online savings account, backup withholding of interest payments may begin upon account opening.
If there’s just a discrepancy between the name and TIN you provided, you may have up to 60 days to correct the issue before backup withholding begins.
Backup withholding “C” program notification
If you’re at risk of becoming subject to “C” backup withholding due to unreported interest or dividend income, the IRS will send you up to four notices over a 120-day period asking you to correct your income tax return to account for the unreported income. If you don’t make those corrections, the final notice informs you that you’re now subject to backup withholding.
If you become subject to “C” backup withholding because you failed to certify that you’re not subject to it, you will not receive a notice from the IRS, and backup withholding may begin immediately. For example, if you accidentally checked the “backup withholding” box while signing up for a brokerage account, backup withholding may begin upon account opening.
If you want to contact the IRS about backup withholding, you can call them at 800-829-1040 from 7 a.m. to 7 p.m. local time.
Get ready for simple tax filing with a $50 flat fee for every scenario
Powered by
Don’t miss out during the 2024 tax season. Register for a NerdWallet account to gain access to a tax product powered by Column Tax for a flat rate of $50 in 2024, credit score tracking, personalized recommendations, timely alerts, and more.
for a NerdWallet account
How to stop backup withholding and get credit for it
Backup withholding doesn’t have to be permanent. If you end up paying more than you actually owe, it can be partially refunded, just like any other tax payment. But the details of how to stop backup withholding vary based on which program you’re subject to.
How to stop “B” backup withholding
Stopping “B” backup withholding is simply a matter of sending the payer a W-9 form with a correct TIN. The payer may send you a W-9 form when they notify you of intent to begin backup withholding. If not, you can download it yourself here.
How to stop “C” backup withholding
To stop “C” backup withholding due to unreported interest or dividend income, you’ll need to report that income — and pay taxes on it, if applicable.
If you’ve become subject to “C” backup withholding accidentally, due to an error while filling out a form, contact the customer service department of the relevant bank, brokerage or other payer institution and see if they can help. They may ask you to send them a new W-9 form to stop backup withholding.
How to get credit for past backup withholding
If you were subject to backup withholding for a particular year, you should get documentation of the amount withheld by each payer on your 1099 or W-2 G forms for that year. To get credit for past backup withholding, add those amounts together, enter the total in line 25 of Form 1040, and then attach the relevant 1099 and W-2 G forms when you file it.
Whether you’re dreaming of beaches in the Caribbean or roaming the streets of Paris, one thing’s for sure: Traveling is expensive. Factor in the cost of flights, food, and lodging, and it’s no wonder some people feel like traveling is reserved only for the rich and famous.
The good news? Traveling doesn’t have to break the bank. Saving enough money for your next holiday is totally doable, and it all starts with proper budgeting for travel. With a defined vacation budget and some planning, you could request time off for travel sooner than you think. Here’s how to do it.
How to build a travel fund
Before you start booking plane tickets and buying museum tickets, you’ll need to determine what’s realistic for your current financial state, according to Athena Valentine Lent, author and founder of Money Smart Latina. If this is your first time budgeting for travel, Lent says these three steps can help you get started:
1. Set a savings goal for your trip
Budgeting for travelstarts with identifying where you want to go and calculating the total amount of money you’ll need to cover that trip.
“Decide where you’d like to go, and start from there,” Lent says. “Research the best times to visit your travel destinations, so you can take advantage of any off-peak seasons. If you’re unable to visit during that time, consider another place.”
In addition to researching prices of big-ticket items like airplane tickets, Lent recommends researching all potential expenses to paint an accurate picture of your total cost. “Look into how much you’ll pay for lodging, food, transportation to get there—plus transportation while there—and any other exhibits or bucket items you want to check off while you’re there,” she says.
Vacations can and should include plenty of spontaneity, so Lent recommends giving yourself some extra wiggle room in your travel fund to cover other possible expenses (think: last-minute excursions and souvenirs). As you continue to plan, creating a financial vision board can help you visualize your dream vacation and keep you motivated during your savings journey.
2. Turn one big goal into multiple smaller goals
Once you’ve established how much your trip will cost, determine the amount you need to save on a monthly, bi-weekly, or weekly cadence until you can fully fund your goal, Lent says. For example, if you’ve figured out that you need $1,000 for a trip coming up in five months, you’d want to save $200 a month. Or if you wanted to break it up into even smaller chunks, you could have a savings goal of $50 a week.
Breaking your goal into smaller steps makes it appear more manageable, Lent says. Saving $200 a month feels much more attainable than trying to put away $1,000 all at once. Psychologically, splitting up a large goal into multiple smaller ones gives you a sense of accomplishment every time you cross one of your funding milestones.
3. Keep your travel fund in a separate savings account
There are ways to make your money work harder for you. With a high-yield savings account, you’ll earn a specific percentage of interest on your money, known as an annual percentage yield (APY). That interest is compounded, too, so you’ll grow your savings even faster.
Keeping your travel fund in a separate savings account is another helpful strategy. It can streamline your efforts, making it easier to track progress and know exactly when you’ve reached your goal.
“I love me a high-yield savings account,” Lent says. “The ability to put cash aside into a different account labeled with a goal motivates me to call it ‘my precious’ and protect it. I’m also a firm believer in making your money work for you.”
Tips for keeping your travel fund on track
Making a plan and budgeting for travel is a critical first step, but if you want to make your dream vacation a reality, you’ll need to stay on track. To keep your momentum going, consider these four tips for how to save money for travel:
1. Curb your spending habits
Looking for some low-hanging fruit? Lent says to try reducing nonessential spending first. While that might mean spending less money on things like dining out or new clothes, it doesn’t mean you need to live like a hermit to achieve your financial goal.
“Cutting back on your discretionary spending can seem brutal when all you want to do is live your current lifestyle,” says Lent. “My advice is to cut spending in small amounts at first and then look for cheaper ways to do the things you want to do. As you begin to cut back while still doing the things you love, you won’t be depriving yourself, which makes it easier to stick to your budget.”
2. Take advantage of freebies and discounts
Just because you’re budgeting for travel doesn’t mean you have to give up on fun entirely. These days you can find coupons or discount codes for almost any activity, from festivals and sporting events to restaurants and bars. “For example, if you want to go to a concert, look for it on a group coupon site,” says Lent. “Plan on drinking with friends? Ask your friends to check out a happy hour with you.”
There are also plenty of ways to have fun without spending money. Look no further than your local community for meetup groups, free museum or zoo days, or music nights hosted by your city or town. Depending on where you live, getting out into nature is often free, and many national parks even offer free entry on certain days. Entertaining yourself doesn’t have to be expensive – finding no-cost alternatives will enable you to put even more money away in your travel fund.
3. Hack your way to savings with a cashback credit or debit card
Another way to make your travel dreams come true is to use credit card rewards in a process known as “travel hacking,” Lent says. Some credit card providers will give you points or cash back on a percentage of the money you spend overall or in certain categories like food, travel, or gas. If you want to use these credit card rewards for travel, however, Lent recommends paying off your credit card debt each billing cycle.
Some banks also offer cash back when you spend with your debit card. For example, with Discover® Cashback Debit, you can earn 1% cash back on your debit card purchases1 and put that extra cash toward building up your travel fund.
Earn cash back with your debit card
Discover Bank, Member FDIC
4. Consider a side hustle
If you feel like you’re not making as much headway as you’d like on your travel fund, you might want to explore some side hustle ideas to earn extra income. Side hustles can range from freelance projects on the weekend to driving for a ride-sharing company.
Pursuing a side hustle isn’t for everyone, but if you have the time and ability to take on additional work, Lent says, you can use the extra cash to fund your travels without dipping too much into your primary source of income.
Your next vacation is one travel fund away
Planning a vacation can be intimidating, especially once you start calculating how much everything will cost. But just like any financial goal, saving money for travel is doable if you have a clearly defined budget and stick to your plan.
Take Lent’s advice: If you want to know how to save money for traveling, determine where you want to go, research how much it’ll cost, and break your savings goal into manageable chunks. You’ll be jet-setting off to your next adventure in no time.
If you’re ready to build your travel fund and make your vacation dreams a reality, check out the features of a Discover Online Savings Account to see how it can keep your travel savings safe and growing over time.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), online sports betting and internet gambling transactions, and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal®, who also provide P2P payments) may not be eligible for cash back rewards. Apple Pay® is a trademark of Apple Inc. Venmo and PayPal are registered trademarks of PayPal, Inc. Samsung Pay is a registered trademark of Samsung Electronics Co., Ltd. Google, Google Pay, and Android are trademarks of Google LLC.
You’ve got some cash in a savings account earning a paltry 0.01%. You plan to spend it to buy a home or a car or something else in a few years. How can you invest the money until then to earn some extra interest?
It’s called short-term investing, and it’s tricky. Put your money in the stock market, and it could be gone when you need it. Put it in a traditional savings account, and it earns practically nothing. So, what should you do?
Recently, a listener to our podcast, Michael, emailed me with just this dilemma:
Let’s answer Michael’s question.
What is a Short Term Investment?
What exactly is a short-term investment? Well, there is no official definition. There is no governing body that defines what short-term or long-term investing is. It’s arbitrary.
For me, short-term investing is investing money you’re going to need to spend in fewer than five years.
Why five years? Because most of the time, the stock market doesn’t lose money over a 5-year period. It can, of course. Go back to the 1930s and 40s and you’ll find 5-year periods where the market was crushed, as this Bankrate slideshow demonstrates… 1932 was the worst. The 5-year period ending that year saw a drop of 60.9%.
But that’s rare.
When we have a pretty significant stock market correction or a bear market, it usually takes us at least five years to pull out of it. Of course, that’s not a guarantee. We could hit a bear market, and it could take us 10 years to pull out of it.
Either way, five years is where I draw the line. You may want to draw your own line more conservatively… or even less conservatively, for that matter. What I hope to do today is give you some information that will enable you to make a sound decision.
So, let’s begin.
The 10 Best Short Term Investments
1. Lending Club
Lending Club offers a great option with the potential for better returns. This P2P lending platform makes it easy to invest in loans to individuals and companies.
It’s also perfect for short-term lending. Loans on the platform are for either three or five years. If you know you won’t need the money until then, Lending Club is a reasonable alternative.
I’ve invested in Lending Club loans since the platform was first launched. My current annualized return, including loans that defaulted, is over 8%.
With higher returns, however, comes higher risks. Loans do go into collections and eventually default from time to time. Over the years, I’ve invested in 17 loans that defaulted.
The key is diversity. You can invest in a loan with as little as $25. By diversifying across many loans, you minimize the effect a single default will have on your portfolio.
LendingClub Pros and Cons
Very easy to invest in a diversified loan portfolio
Potential for high returns on a short-term basis
Not FDIC-insured
Cannot liquidate the loans early
Potential for losses
Expected Annual Return: 5.00 to 7.00+%
Read more: Lending Club Review
Lending Club Disclaimer:
2. Certificate of Deposit
The second option for short-term money is a certificate of deposit. CDs give us a lot more options than a savings account. The term of a CD can range from a few months to more than five years, and the longer the term, the higher the rates.
These higher rates, however, come with added risk. Here’s why.
A CD can be cashed in before it matures. For example, you could invest in a 5-year CD, but decide to withdraw your money after the first year. If this happens, however, most CDs charge a penalty. The amount of the penalty varies by bank and CD product.
As a result, it’s best to keep money in a CD until it matures. For this reason, picking the length of the CD is a critical decision.
So, you end up having this delicate dance- you want a long CD term so that you can make the most interest. But you don’t want to pay a penalty if you take the money out early.
CD Pros and Cons
FDIC insured
CD terms ranging from 6 months to 5 years or longer
Higher interest rates on longer term CDs
Can create a CD ladder
Still relatively low interest rates
Penalty for early withdrawal
Expected Annual Return: 1.00 to 2.50%
Here is a list of banks that offer high-yield CD options:
3. Investing With Betterment
Betterment presents an interesting opportunity for short-term investors. It’s not an investment. Rather, it’s an online company that makes investing in stock and bond ETFs easy.
The service can be used for all types of investing, including long-term retirement investing. To use Betterment in the shorter term, you must get the asset allocation right.
Learn More: The Perfect Asset Allocation Plan
Betterment lets investors decide how much to put in stock ETFs and how much to put in bond ETFs. For short-term investing, a 50/50 allocation protects against the downside while allowing for potentially higher returns.
Here’s the 50/50 asset allocation with Betterment:
The 50% in stocks gives us a chance to earn greater returns. The 50% in bonds helps protect short-term investors from a market crash.
There are no guarantees, of course. But looking at a 50/50 portfolio during the 2008-2009 market crash gives us some comfort.
Using PortfolioAnalyzer, I assumed we invested $10,000 at the start of 2008. Assuming we needed the money three years later, how would our 50/50 portfolio perform over a 3-year period. Remember that in 2008, a total U.S. stock index fund lost more than 37%.
Here are the backtested results of our 50/50 portfolio:
The portfolio still lost money in 2008, although far less than the 37% that the market dropped. And what was our final portfolio value at the end of 2010? It grew to $11,014, for an annual return of 3.27%.
While 3.27% is not a great return, remember that 2008 was a very bad year for stocks. Shift our time period one year forward (2009-2011) and our annual return jumps nearly 11%.
As a result, a 50/50 portfolio with Betterment is a reasonable choice for those needing the money in three to five years.
Betterment Pros and Cons
Very easy to implement
Money can be withdrawn at any time
Potential for much higher returns
Fees are very low
Not FDIC-insured
Potential for capital losses
Expected Annual Return: 0 to 10+%
Learn More: Betterment Review
4. Online Savings Account
Traditional banks pay as little as 0.01% on a savings account. That’s as close to zero percent as you can get.
One option for short-term savings that pay more is to go with an online bank. While the rates are still nothing to brag about, the top online savings accounts today pay about 0.50%. Chime®is now paying an APY of 2.00%, which is right in line with the best online savings accounts available. Chime offers a terrific online savings and checking account geared toward savers. You can see the top current rates here.
Online Saving Account Pros and Cons
FDIC insured
Funds can be withdrawn at any time
Rates better than a brick and mortar bank
No monthly fees
Interest rates are still low
Inflation exceeds the rates
Expected Annual Return: 1.30%
Here are some high-yield savings account options:
5. Municipal Bonds
There is a significant downside to bonds: taxes. Interest earned on bonds is taxed, as are any capital gains.
One option to reduce the tax burden is municipal bonds (known as “munis”). These bonds are typically free of federal income tax and may be free from state income tax, too. Munis are an excellent option for those in the higher federal tax brackets.
I’ve invested in Vanguard’s Intermediate-Term Tax-Exempt Fund (VWIUX) in the past. SEC yields on these funds are lower than similar taxable bonds. The comparison must be made on an after-tax basis. This fund currently sports an SEC yield of almost 2%.
Municipal Bonds Pros and Cons
Potential for higher returns
Tax advantages
Easy access to funds without penalty
Potential for losses
Not ideal for those in lower tax brackets
Expected Annual Return: 2 to 5% (after tax)
6. Short Term Bonds
Our third option is short or intermediate-term bond funds. More specifically, we want to look at low-cost index mutual funds and ETFs. Both Vanguard and Fidelity offer several options.
Here, you have some important choices to make. Do you want a fund that invests just in U.S. government bonds or one that also invests in corporate bonds? Do you want a short-term bond fund or an intermediate-term bond fund?
Like everything else in life, these choices involve trade-offs.
U.S. Government bonds are more secure than corporate bonds, but they pay less. Short-term bonds are less sensitive to interest rate fluctuations than intermediate-term bonds, but they pay less. Today, short-term government bonds do not pay much more than an online savings account. For example, the SEC yield on Vanguard’s short-term Treasury fund is just 1.25%.
For my money, I want to do better than that in a bond fund. While intermediate-term funds can lose money in a given year, they are reasonably stable. Vanguard’s Intermediate-Term Bond Index Fund (VBILX), for instance, costs just 0.07% and sports an SEC yield of over 2.50%.
A review of the performance of VBILX shows that it lost money in only one of the past ten years:
Short Term Bonds Pros and Cons
While not FDIC-insured, still reasonably secure
Intermediate-term bonds can yield significantly higher rates than a savings account
Money can be withdrawn from the fund when needed
Not FDIC-insured
Can lose money
Rates are historically low
Expected Annual Return: 1.00 to 6.00%
7. Bulletshares
There is a downside to traditional bond funds. They can experience capital losses as funds sell some bonds to buy new ones. If interest rates have risen, the fund incurs a loss on the sale of bonds.
Enter Guggenheim’s Bulletshares. These ETFs combine the potential returns of a bond fund with the fixed maturity of a CD. I first learned about Bulletshares from Jeanne J. Fisher, MBA, CFP, CPFA of ARGI Financial Group.
Traditional bond funds continue in perpetuity. The fund management regularly sells bonds as maturities age and replaces them with new bonds with longer maturities. In contrast, Bulletshares have a defined term of one to ten years.
At the end of the term, assets are returned to existing shareholders. And unlike CDs, a shareholder can sell his or her ETF shares at any time without penalty.
Related: What Are ETFs (and Are They a Strong Investment Option)?
Bulletshares come in two flavors: (1) corporate bonds and (2) high-yield corporate bonds. The first invests in investment-grade corporate bonds. The second buys bonds issued by corporations with a credit rating below investment grade. It involves more risk but offers higher returns.
As an example, the Guggenheim BulletShares 2020 High Yield Corporate Bond ETF has a current yield to maturity of over 5%.
Bulletshares Pro and Cons
Potential for higher returns
ETF shares can be sold at any time
Fixed maturity dates
Not FDIC-insured
Funds can lose money
Expected Annual Return: 1.50 to 5.50%
8. Wealthfront
Like Betterment, Wealthfront is a robo-advisor that makes investing easy. I list it here in addition to Betterment for one reason: It’s free.
Well, it’s free for your first $5,000 if you sign up using a DoughRoller link. After that, the cost is similar to Betterment. For both, you pay the very low fees charged by the ETFs. You also pay a Betterment or Wealthfront fee of about 25 basis points.
With Wealthfront, however, the 25 basis point fee is waived for the first $5,000.
Wealthfront Pros and Cons
Very easy to implement
Money can be withdrawn at any time
Potential for much higher returns
Fees are very low
Not FDIC-insured
Potential for capital losses
Expected Annual Return: 0 to 10%
Read more: Wealthfront Review
9. Worthy Bonds
Worthy Bonds offers you an opportunity to earn 5% on your money, with an investment of as little as $10. It’s a peer-to-peer investment site, where you can invest money in bonds issued by small businesses. The bonds aren’t guaranteed by a government agency, like FDIC, but many of them are collateralized by business inventory.
When you use the Worthy Bonds mobile app, you can automatically add funds to your investment account. Similar to many micro-savings apps, Worthy Bonds uses spending round-ups to move small amounts of money into your investment account as you spend. For example, if you pay $4.10 for a cup of coffee, the app will charge your account an even $5. $4.10 will go to pay the merchant, and $0.90 will go into your investment account. Once you accumulate an even $10 in round-ups, the funds can be used to purchase a bond.
Worthy Bonds Pros and Cons
Invest with as little as $10
An investment of $1,000 can be diversified across 100 different bonds
Interest is credited weekly
There are no fees charged on your account
Earn interest at more than twice the rate of inflation
Pays simple interest only, and does not compound for higher returns
The maximum investment is not more than 10% of your net worth or annual income, or $100,000
Expected Annual Return: 5%
Read more: Worthy Bonds Review – A Worthy Investment for Everyone
10. SmartyPig
The final investment option on our list offers an interesting twist to online savings accounts. SmartyPig combines a high yield with savings goals. As of August 2018, SmartyPig currently offers a high yield savings APY of 1.55%.
Now, the savings goals. With SmartyPig, you set specific savings goals. You can set multiple goals, or just one. You then add to the account until you reach your goal. In this way, SmartyPig is ideal for short-term savers.
Related: 6 Keys to Setting Financial Priorities
SmartyPig Pros and Cons
FDIC-insured
Potential for returns higher than most online banks
Makes saving for a specific goal very easy
Low rate compared to other options
Expected Annual Return: 1.00+% (depending on account balance)
Is the Stock Market a Good Place for Short-Term Investing?
We could stop here. After all, the above short-term investing options should cover most situations. Yet many will ask one remaining question: Why not just put all our money in the stock market?
It’s an understandable question. Particularly when the market is rising, missing out on money can be painful. It’s funny, though. Nobody asks me this question in a bear market.
And that’s the point. With the stock market, you can lose money over a short period of time.
Thinking Long Term: Sweat In Up Markets So You Don’t Bleed In Down Markets
Let’s return to 2007 and run a test. We’ll use the Vanguard S&P 500 index fund as a proxy for the market. And we’ll assume we have $10,000 at the start of 2007, that we’ll need to use in three to five years.
How would a $10,000 investment have performed? At the end of three years, we would have $8,395, for an annual return of -5.66%. At the end of five years, we would have $9,837, for an annual return of -0.33%
Yes, 2008 was a bad year. But again, that’s the point. Investing 100% of short-term money in the stock market presents a significant risk of loss of capital. Fortunately, we have better ways to invest for the short term.
Public is an app that helps you invest in individual stocks, even if you don’t have much money to commit. What makes it good for short-term investments is its lack of fees. There is no commission to buy or sell a stock so you can move your money in and out of the market at will without worrying about minimum investment terms. Read our Public app review
How to Manage Your Short Term Investments
Track and Analyze your Short-Term Investments for Free: Managing investments can be a hassle. You may have multiple IRAs, multiple 401ks, as well as taxable accounts. And then there are bank accounts. The easiest way to track and analyze all your investments, regardless of where they are located, is with Empower’s free financial dashboard.
Empower enables you to connect all of your 401(k), 403(b), IRAs, and other investment accounts in one place. Once connected, you can see the performance of all of your investments and evaluate your asset allocation.
With Empower’s Retirement Fee Analyzer you can see just how much your 401k and other investments are costing you. I was shocked to learn that the fees in my 401(k) could cost me over $200,000!
Empower also offers a free Retirement Planner. This tool will show you if you are on track to retire on your terms.
If all of this is overwhelming and not something you want to handle on your own, you may want to think about working with a financial advisor or investment advisor. We suggest visiting Paladin Registry, where you can fill out a form online to tell them what you are looking for. It’s free to use and Paladin Registry will email you a list of three highly-rated professionals that match your needs. From there you can interview each one and choose the best fit.
Happy investing!
Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.
Building a budget isn’t hard, but it does require time and effort. And once it’s completed, it’s something you should be proud of. Yet, many people have trouble sticking to a budget, essentially throwing all their work out the window as a result of impulse buys, unrealistic expectations, or a lack of discipline. Here’s a look at some of the reasons budgets can fail and tips for making a budget you can stick to.
Understanding the Importance of Budgeting
A budget allows you to organize your money according to your priorities and plays a key role in achieving financial goals. Those goals can be anything from taking a vacation and buying a new car to funding future education and retirement. With a well-crafted budget, you can work on multiple goals at the same time.
A budget is also one of the top tools to help you stay out of debt or rein in any outstanding debt you may already have. In addition, having a budget can help simplify your spending decisions, making it easier to determine which purchases are worth making and which you don’t actually need.
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
Get up to $250 towards your holiday shopping.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $250 cash bonus. Plus, get up to 4.60% APY on your cash!1
Overcoming Common Budgeting Challenges
Budgeting usually begins with the best of intentions. However, it’s all too easy to get sidetracked. Temptations and unexpected expenses can cause a budget to go off the rails, leading to overspending, missed bill payments, and debt. Here’s a look at some of the most common reasons why budgets fail.
Lack of Discipline
Though people often get excited about putting their financial house in order, it can be easy to slip back into the lifestyle they led before putting a budget in place. If you already live within your means, that might be okay. But if you’re a habitual overspender, it’s important to recognize that those behaviors have to change to keep your budget on track.
Unrealistic Expectations
Many people think budgeting requires drastic measures. For example, if you’ve been living beyond your means and want to rein in your spending, you may decide you must go from spending more than you make to living off half your income. But that may not be a viable option, at least at first. When you fail, you might give up on budgeting altogether. It’s important to set achievable expectations.
Discounting Irregular Expenses
While building your budget, you probably remember to factor in regular expenses like your monthly electricity bill and grocery shopping. But it can be easy to forget to include expenses that occur on a more infrequent schedule, such as quarterly or annually.
Annual membership fees, homeowners’ association fees, and kids’ camp tuition may come up only once a year, and that can make them easy to forget. Failing to account for these costs can throw your budget off once they come due and you may have to scramble to find the cash to pay them. You can try to account for these expenses by saving a little each month to help cover them.
Recommended: Determining the Right Spending/Budgeting Categories
Getting Lost in the Weeds
While it’s important to take a thorough accounting of your expenses when making a budget, it is possible to go overboard with so many line items that can make your head spin.
A budget with too many line items can be tedious to update and track. It can be more productive to have broad line items that encompass a wider array of expenses, so if you spend a bit too much on one small item, it won’t make much difference.
Your Social Circle
The people you surround yourself with, including your friends, family, and partner, can have a huge impact on your spending. If these people tend to be big spenders, you might be tempted to spend when you’re around them. It would be a shame if one big night on the town threw off a whole month’s worth of budgeting plans.
If you’re saving for a specific goal, like putting a down payment on a home, you might let your friends know that you’re trying to stick to a budget, so maybe they won’t tempt you with expensive sushi dinners or weekends in Vegas. In their excitement to help you achieve your goal, they may be willing to trade nights at the bar for cheaper activities like game nights in.
Creating a Realistic Budget
One of the most important tips for how to stick to a budget is to start with a realistic budget — or, in other words, a budget that is easy to stick with. These three steps are key to starting off on the right foot.
Assessing Income and Expenses
To create a realistic budget, you need to first assess where you currently stand. That means calculating how much, on average, is coming in each month and how much, on average, is going out each month.
You can do this by gathering bank statements from the past several months, then adding up all of your (after tax) monthly income. This is how much you have to spend each month. Next, add up what you are spending each month to come up with a monthly average. If your average monthly spending exceeds your average monthly income (meaning you’re going backwards) or is about the same (meaning you’re not saving), you’ll need to find places to cut back.
Setting SMART financial goals
Whether your goal is to build an emergency fund or go on a great vacation, setting clear, achievable financial goals will help you create — and stick to — your budget. Strong goals serve as reminders for why you’re choosing to spend less in some areas, which can make sticking to your budget feel more rewarding.
Consider using the SMART framework when setting goals. You’ll want your goals to be:
Specific: Rather than saying, “I’d like to save more,” try to be more specific, such as “I’d like to put a downpayment on a car in four months.” Measurable: You want your goals to have a measurable outcome, such as a set amount of money you’d like to save by a certain date. Attainable: If a goal is too hard to achieve, you might give up before you get very far. Strive to set goals that are attainable given your current income, expenses, and time frame. Relevant: It’s key that your goals address your top needs and concerns. Consider what will give you the most security and value to your life right now. Time-based: Having a set timeline to reach your goals can help you stay on track.
Recommended: Smart Financial Strategies to Reach Your Goals
Prioritizing Essential and Non-Essential Expenses
A budget is an opportunity to align your spending with what’s most important to you. You’ll want to have three main categories for spending:
• Essential expenses (“needs”) These are your necessities, such as groceries, housing, healthcare, and transportation.
• Nonessentials (“wants”) These are the expenses that aren’t necessary for survival but enhance your quality of life.
• Savings This is the money you separate from spending each month and allows you to reach the financial goals you established earlier.
A very basic approach to budgeting is the 50-30-20 rule, which divides your net income into the above categories, spending 50% on needs, 30% on wants, and 20% on savings. Those percentages may not be realistic for everyone, however, If you live in an area with steep housing costs, for example, you may need to spend more than 50% on needs and take some away from the “wants” and/or “savings” categories.
Practical Tips to Stick to Your Budget
Once you have a basic budget in place, you’ll need to stick to it — or you won’t see any progress towards your goals. Here are six ways to keep spending and saving on track.
1. Sleep on Big Purchases
Impulse buys can quickly throw your budget off course. To avoid the problem, try the 30-day rule: If you see something nonessential you want to buy either online or in person, put the purchase on a one-month pause. Tell yourself that if, after 30 days, you still want the item, and you can afford it, you’ll buy it. This gives you time to reflect. You may well decide that you don’t need or want the item that badly and forgo the purchase.
2. Aim to Never Spend More Than You Have
Getting into debt can be a vicious cycle that is tough to get out of. Just paying the minimum on your credit card balance, for example, means you’re never getting ahead of your debt. Running a balance also means you’re going to end up paying far more for your purchases than the original price tag.
If you want something you can’t afford right now, plan for it, and start setting money aside for it each month. When you have enough, you can splurge without guilt — or throwing off your budget.
3. Set up Auto Draft for Bills and Savings
To make sure you never miss a payment (and avoid late fees), consider setting up autopay for all of your regular bills. You can apply the same principle for paying yourself (a.k.a saving). Simply set up a recurring transfer from your checking account to your savings account for the same day each month (ideally, right after you get paid). Even small amounts will grow into something larger, which can ultimately buy that vacation or cover an unexpected car repair.
💡 Quick Tip: Want a simple way to save more each month? Grow your personal savings by opening an online savings account. SoFi offers high-interest savings accounts with no account fees. Open your savings account today!
4. Plan Your Meals to Curb Impulsive Spending
When you’re hungry and there’s no food in the house, it’s hard to resist the call of the drive-through or your fave local take-out spot. You can avoid this temptation by planning your meals (including breakfast, lunch, dinner, and snacks) each week, making a grocery list, and sticking to that list in the store. Meal planning saves you from blowing your weekly food and restaurant budget. Bonus: You’ll probably eat healthier, too.
5. Utilize Technology for Tracking and Managing Your Budget
One of the best ways to stick to a budget is to harness technology. Putting a budgeting app on your phone, for example, can help you keep track of your spending and savings. These apps connect with your financial accounts (including bank accounts, credit cards, and investment accounts), so you don’t have to manually enter your purchases and transactions.
Apps can help you monitor bank accounts, credit card spending, and even keeping track of how much you spend in cash. Some apps allow you to split your spending into your own categories and can send you alerts when you start to max out your budget to help keep you from going over. Even better, many budgeting apps are free (at least for the basic service).
6. Revisit and Adjust Your Budget as Needed
A successful budget is rarely a one-and-done proposition. As your income, expenses, and/or financial goals change, it’s a good idea to revisit your budget and make adjustments.
You may want to check in on your budget every six to 12 months to reflect on your budgeting journey. How well is your budget working to advance your goals? Is it still relevant to your life? Maybe you’re spending more in certain categories and less in others. Perhaps you can siphon off a bit more to savings each month and reach your goals faster. Picking up changes in your financial habits can help ensure that your budget reflects your current priorities.
The Takeaway
Learning how to stick to a budget means starting with a realistic budgeting plan, setting SMART goals, picking the right tools, and keeping a watchful eye on your money as your income and expenses change. Remaining agile and staying disciplined with your budget will allow you to meet your expenses, enjoy extras like travel and entertainment, and achieve your future goals.
Better banking is here with up to 4.60% APY on SoFi Checking and Savings.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Inside: Tight on time or money? One of these mini savings challenge printables is perfect for you. With these free printables, you’ll be able to save more money in no time.
The concept of a mini savings challenge is all about making money-saving a fun and engaging process. It breaks down your broader financial goals into manageable, short-term targets that cumulatively will help you reach your long-term objectives.
Around here at Money Bliss, we are known for having the best money saving challenges. While they are super popular on Pinterest and Google, what matters the most to us is that people are actually using them and their lives are changing.
So, if that is what you are looking for, then you are in the right place.
We know that the personal savings rate is dipping into the lowest range since 2007-2008 financial crisis around 3.4%.1 That is alarming because many people are one step away from not being financially stable.
Let’s dig into those mini saving challenges to make an impact in your financial life.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Why is a Savings Challenge Beneficial?
A savings challenge, while enjoyable, serves a more significant purpose. It instills a sense of financial discipline and allows you to visualize tangible results.
By making saving a fun and rewarding game, you’re more likely to stay committed and motivated.
This is why my money saving challenges are so helpful for thousands of my readers.
How this Mini Challenge Works?
Mini savings challenges work on the principle of small, regular savings resulting in significant sums over time.
By following a set rule – such as saving a particular amount every week, or matching a specific spending habit with a savings deposit – these challenges make it easy and fun to grow your savings without feeling overwhelmed.
Popular Mini Savings Challenge to Save Money
I love that I am known as an expert in helping people save money. The reason is simple – I love a good challenge.
If you have the right mindset, then you can save money on your income.
1. $300 Mini Saving Challenge
Many of us dream about having a comfortable savings account, but it’s often easier said than done. However, with the $300 Mini Saving Challenge, you can start building that financial safety net one step at a time. This challenge aims to help you stow away $300 and note slight improvements in your spending habits.
The $300 Mini Saving Challenge works by asking you to save a small amount each day. The goal is to gradually increase the daily savings, making it less burdensome and more achievable to hit your target of $300. This challenge is perfect for beginners who are apprehensive about taking on substantial financial commitments all at once but still want to cultivate good money-saving habits.
Expert Tip: Utilize a savings tracker, whether it’s a traditional paper-and-pencil method or a digital app, to keep track of your progress.
Raisin
Simply select one of the high-yield savings products offered by their network of federally insured banks and credit unions to begin your savings journey.
You can open a free Raisin account in just a few minutes!
Compare Rates
2. $500 Mini Saving Challenge
Learning how to teach yourself to save is one of the hardest things for my readers to do. So, they love these easy milestone challenges
This $500 mini savings challenge is a simple yet effective strategy to begin accumulating a substantial nest egg. This challenge requires you to systematically set aside a predefined amount each day, week, or month, consistently working toward a $500 goal.
Expert Tip: For the $500 Mini Saving Challenge, set a weekly savings goal and commit to reducing unnecessary expenses to manage and accumulate your targeted amount effectively.
3. 10 Week Saving Challenge
Kick-start your savings journey with an invigorating 10-week savings challenge. This feasible initiative can boost your bank balance and cultivate a savings habit.
As James Clear states in his famous bestselling book, Atomic Habits, it takes 21 days to build a new habit.
The challenge will triple your dedication as you will be setting aside a predetermined sum each week for ten weeks. The amounts could steadily increase to enhance the yielded savings.
Week 1 – Save $10
Week 2 – Save $15
Week 3 – Save $20
Week 4 – Save $25
Week 5 – Save $30
Week 6 – Save $35
Week 7 – Save $40
Week 8 – Save $45
Week 9 – Save $50
Week 10 – Save $55
By the end of your 10-week tenure, you will have amassed a handsome total of $325! This challenge is particularly beneficial for beginners who are striving to enforce a strict savings regimen.
Then, you can move on to our popular 52 week money saving challenge and choose the proper amount for you.
Expert Tip: Use a calendar or a mobile application to track your savings and keep you motivated throughout the challenge.
4. Mini Birthday Fund
Like a little surprise gift to yourself, the Mini Birthday Fund Challenge is for those who want to ensure they have a little extra cash to celebrate their special day in style. This delightful savings plan can be started at any time of the year, but the closer to your birthday, the more urgent the catch-up.
The plan is intuitive. Choose a monthly savings goal—say, $20—and diligently tuck away that amount every week or month until your birthday arrives. Then, voila! You have a mini birthday fund to splurge on a rewarding gift or experience gift for you. My personal favorite is spa time!
This is self-care and financial discipline bundled into one smart package.
Expert Tip: You can modify the amount you need to save and the total you need to save.
Our Top Pick
CIT Bank
Hailed for its competitive APY rates and digital ease of use, GOBankingRates named CIT as one of the Best Online Banks for 2022.
Earn one of the nation’s top rates.
Pros:
Daily compounding interest.
No account opening or maintenance fees.
Your deposits are FDIC insured.
Deposit checks remotely.
Make transfers with the CIT Bank mobile app.
5. The Penny Challenge
The Penny Challenge further simplifies savings. Plus you will be AMAZED at how much you can save with this simple penny challenge.
Every day you will save one more penny than the day before, yes, just one more penny. That will equal $667.95 in a year.
You can collect all the pennies you acquire and store them in a jar. Once your jar fills up or you hit your 365 days, deposit the pennies into your savings account.
Note: Though the denomination is small, you’ll be surprised at how much you can amass over time. Remember that every penny counts!
6. 365-Day Nickel-Saving Challenge
The 365-Day Nickel-Saving Challenge is perfect for those who like a daily commitment. Start on day one with a deposit of $0.05, and each following day, add a nickel to the previous day’s savings.
By day 365, you will deposit $18.25, accumulating a total of $3339.75 for the year. It’s a manageable and rewarding way to save.
7. The Dime Challenge
The Dime Challenge is similar to the Penny Challenge but uses dimes instead. Though the denomination is small, you’ll be surprised at how much you can amass over time.
Each day you will save ten cents or a dime more than the previous day, by the end of the year, you will save $6,679.50.
Day 1 – Save $0.10, Day 2 – Save $0.20, Day 3 – Save $0.30, and continue for 365 days
Collect all your dimes in a jar, and when it fills up, deposit them in your savings.
10X Effect: This challenge can help you save more money, more quickly than the Penny Challenge because dimes are worth ten times as much as pennies.
8. Dollar Savings Challenge
The $1 Savings Challenge is all about setting aside every single $1 bill that comes your way.
This is a great challenge if you use the cash envelope method for budgeting.
Even if you do this for just three months, you can save up to $1,000. It’s simple — every time you find a $1 bill, put it in your savings jar. This method makes saving money entertaining and gratifying.
9. The $5 Challenge
The $5 Challenge is similar to the $1 Challenge, with just a slight increase in the amount. It involves saving every $5 bill you come across.
Once again, better for those who use cash. But, you still can transfer $5 at intermittent increments to a separate online savings account.
The money saved from this challenge depends on how often you use cash and the duration of your challenge. It’s a doable and straightforward approach to savings.
Raisin
Simply select one of the high-yield savings products offered by their network of federally insured banks and credit unions to begin your savings journey.
You can open a free Raisin account in just a few minutes!
Compare Rates
10. 25 Envelopes Challenge
Another popular choice is the 25 Envelope Challenge which is a simpler version of the 100 Envelope Challenge. You get 25 envelopes, number them from 1-25, and each day, choose an envelope at random and put in an amount equivalent to the envelope number.
By the end of the challenge, you will save $325 in less than a month.
This challenge makes saving money unpredictable and exciting, leading to substantial savings over time. Next, you can try the 50 envelope challenge.
11. The Spare Change Challenge
The Spare Change Challenge involves saving all your loose change in a jar or piggy bank. Once the container fills up, deposit the savings into your bank account.
You’ll be surprised at how quickly the change adds up! However, this challenge works best for those who frequently use cash.
Tip: Don’t be afraid to pick up spare change on the ground!
Our Top Pick
CIT Bank
Hailed for its competitive APY rates and digital ease of use, GOBankingRates named CIT as one of the Best Online Banks for 2022.
Earn one of the nation’s top rates.
Pros:
Daily compounding interest.
No account opening or maintenance fees.
Your deposits are FDIC insured.
Deposit checks remotely.
Make transfers with the CIT Bank mobile app.
12. Round Up Savings Challenge
The Round Up Savings Challenge is best suited for card users. Whenever you make a purchase, round the figure to the nearest dollar and deposit the difference into savings.
For instance, if you spend $17.50, round it up to $18 and save the remaining 50 cents. It may seem small but will accumulate over time.
Go Digital: You can easily do this with the Acorns app.
13. No-Spend Challenge
The No-Spend Challenge encourages participants to avoid spending any extra money beyond the essentials for a set time. This involves taking a “financial fast,” where any non-essential spending is put on hold.
As such, this is one of my personal favorites, especially for those new to budgeting. It really helped me grasp what I truly needed to spend money on and what I didn’t. The same is true for all of my readers. The savings from this challenge can be substantial.
You can tailor the time frame to your own liking — try a no-spend day, week, or even month. Learn more about the no spend challenge.
14. No Eating Out Challenge
A no eating out challenge serves as an excellent tool to realize your spending habits as it eliminates the often overlooked cost of frequently dining out, enabling you to save more than expected. Right now, the average person spends $166 per month with most average costs in the $10-20 range.2
Combating your habit of eating out can lead to considerable savings, hence the No Eating Out Challenge. Under this challenge, you commit to avoiding restaurants, takeaway, and delivery for a set period, typically a month. The money saved from not dining out is then transferred into your savings, leading to substantial amounts over time.
This challenge makes you conscious of your expenditure and allows you to understand the significant amount you can accumulate over a period, promoting better spending habits.
15. The Spending “Swear Jar” or “Bad Habit” Challenge
Implementing a swear jar or a ‘bad habit’ jar can serve multiple purposes effectively. Not only does it stimulate the accumulation of savings, but it also aids in the transformation of replacing a bad habit with a good habit.
The rule is simple – each time you indulge in a specified bad spending habit, like making an unplanned purchase, you deposit a set amount (like a dollar) into your “swear jar.” This challenge effectively boosts savings while reducing unwanted expenses.
This is a great tactic to reduce your variable expenses.
Bonus: Savings Percentage Challenge
Last, but not least, my personal favorite! Increasing your Savings Percentage challenge.
The Savings Percentage Challenge urges you to save a fixed percentage of your income, preferably 20% every month. By adjusting the savings percentage to your comfort level, this challenge provides adaptability and the potential for significant savings over time.
To encourage savings as a regular habit, increase your savings percentage by 1% each year or with any pay raises or expense reductions.
See how the saving percentages work.
Tips for Successful Savings Challenge
Tip #1 – Creating Your Savings Goals
Creating specific, measurable, achievable, relevant, and time-bound (SMART) savings goals is the first step to your savings success. Your goals could be anything, ranging from a weekend getaway to creating an emergency fund.
Having clear savings goals keeps you motivated, providing a sense of purpose and direction. Learn more about smart money goal setting.
Tip #2 – Establishing the Savings Timeline
Once you have your savings goal, establish a realistic timeline to achieve it.
If your goal is to save $1000 and you decide to save $100 per month, your timeline will be 10 months.
If you need to save $300 in 30 days, then you must save $10 a day.
Establishing a clear timeline helps you organize your savings efficiently and remain motivated in your journey.
Tip #3 – Automatic Savings
One area I always stress to my readers is to pay yourself first. This concept is to set money aside first when you get your paycheck.
Then, take it one step further and establish an automatic transfer from your regular account to your special savings fund each pay period or month. This way, you won’t have to remember to make the transfer yourself, and it becomes an out-of-sight, out-of-mind saving habit!
Tip #4 – Staying Motivated through the Challenge
Track your progress visually, say, by coloring a box each time you save is habit-worthy. Keep your progress chart somewhere easily visible. This practice makes tracking fun and keeps you encouraged to save more.
Our free resource library of printables is full of possible money saving challenge ideas!
Staying motivated throughout your savings journey is crucial. Plus, watching your savings grow over time can be incredibly satisfying.
Tip #5 – Adjust your mindset for Improved Savings
Achieving your savings goals is truly a mindset game. Instead of seeing savings as a subtraction from your income, adjust your mindset to view it as paying yourself first.
Moreover, remember not to beat yourself up over occasional slip-ups. Continue to focus on your goal and celebrate small achievements.
Every dollar saved gets you one step closer to your goal.
Extending the Mini Savings Challenge – What’s Next?
Once you have completed a mini savings challenge, take your saving habit to the next level. Assess your financial situation and savings goal to determine new challenges.
You could consider higher-value monetary challenges or extend the challenge’s duration. Remember, consistent saving habits can greatly impact your long-term financial health.
Maintaining consistency in saving money is a golden key to long-term financial health.
Here are our popular money saving challenges:
Regardless of the amount, the habit of regularly putting money aside significantly contributes to building considerable savings. Remember, it’s not always about how much you save, but how consistently you do it.
Consistently saving, even smaller amounts, can lead to substantial totals over time.
Download the Printable Savings Tracker
To make your savings challenge fun and interactive, download one of our free printable savings trackers. These printable trackers will help you visually track your progress, boosting your motivation.
Every time you save money, color in a box or check it off.
Seeing this visual representation of your savings grow is a fun, rewarding way to track your journey toward your financial goal. Once you reach your goal, start again and keep the momentum going.
**To access these free printable, you must subscribe to my newsletter and you will be emailed the password.**
Frequently Asked Questions (FAQs)
Yes, you can start a savings challenge at any time. There is no specified period or date to begin.
You can choose a day that suits you best and kick off your savings challenge. Remember, the important part is not when you start, but that you start – and consistently save.
Staying committed to your savings plan is primarily about discipline and motivation.
Personally, I visualize my financial goals and stay motivated by celebrating small wins. You can do the same thing.
Also, use a savings tracker to make your progress tangible and fun. Finally, involve family or friends in your savings challenge so you can motivate and encourage each other along the way.
Of the Mini Savings Challenges, Which Will You Try First
Embrace the journey of a savings challenge, enjoying the process just as much as the destination.
This is key to becoming financially stable. It’s not only about reaching your financial goal but also about developing lasting habits of financial discipline and stewardship. These mini savings challenges are a learning experience and remember, no matter the size of your savings, every step is a step in the right direction.
With the help of a mini savings challenge tracker, you can start small yet grow big in savings.
These mini challenges, though small-scale and manageable, can lead to a significant increase in your savings over time. More than that, they encourage the much-needed habit of saving regularly.
Get started on your savings journey, make it enjoyable, and watch your money accumulate over time.
Sources
FRED St. Louis Fed Ecomonic Data. “Personal Saving Rate.” https://fred.stlouisfed.org/series/PSAVERT. Accessed November 8, 2023.
US Foods. “The Diner Dispatch: 2023 American Dining Habits.” https://www.usfoods.com/our-services/business-trends/american-dining-out-habits-2023.html. Accessed November 8, 2023.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Financial wellness doesn’t have to be complicated. While you’ll eventually want to work up to a financial plan that includes a detailed budget, savings goals, and a retirement plan, there are small things you can do today to set you off on the right foot. What follows are nine hacks for money that can help you get organized, save more, knock down debt, and master the basics of personal finance.
9 Money Hacks to Help Save You Money
These simple moves can help you boost your financial health, reach your goals, and avoid financial pitfalls like impulsive spending and unmanageable debt spirals.
1. Use Multiple Savings Accounts
Having a different savings account for each one of your goals — whether it’s a new car, a down payment on a house, or even a big vacation — can be a great way to keep track of your progress. If you only have one account, it can be difficult to know what money is earmarked for which goal. For example, if you have $15,000 in your savings account, it may be hard to track that you have $5,000 saved for an emergency fund and $10,000 for a home purchase.
Separate savings accounts makes it easier to prioritize the goals you’re eager to reach, allowing you to fund those accounts first. It also decreases the chances you will raid the account to cover another expense. If an account is clearly labeled Emergency Fund, you may think twice about using it for a trip to Tulum.
And since many banks now offer savings accounts that feature the same interest rate, no matter how low your balance, you don’t need to put all your savings in the same account to get the highest yield.
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
2. Ditch Your Low-Interest Savings Account
Is there anything better than money you don’t have to work for? The interest you’re paid for keeping money in a bank account is basically that. If you’re still using your first savings account, however, chances are you’re getting a low interest rate.
Right now, the best online savings account interest rates are around 5%. Traditional brick-and-mortar banks, on the other hand, generally offer rates that are close to the national average, which is currently 0.46%. If you have a $10,000 savings balance, choosing an account that pays 5% will earn you about $500 in a year. If it stays in a bank account that pays 0.40% APY, you would earn about $40. The difference increases the more you deposit and the longer you keep the money in the account.
Failing to open a high-interest savings account means you’re giving up free money.
Get up to $250 towards your holiday shopping.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $250 cash bonus. Plus, get up to 4.60% APY on your cash!1
3. Put Saving on Autopilot
Automating your savings is a great way to separate your savings from your spending without any extra effort on your part. If you wait to see what you have left at the end of the month to make a manual transfer to savings, you may forget or, worse, you may have nothing left to move.
There are two ways to automate your savings: One is to split up your direct deposit and funnel part of it into a savings account; the other is to set up a recurring transfer from your checking account into a savings account for the same day each month (ideally right after you get paid). If you have different savings accounts for different goals, you can choose to have a set amount for each account.
4. Pay Down High-Interest Debts
Credit card annual percentage rates (APRs) are now averaging a record 28.93%, up from 26.72 percent in 2022. To whittle down high-interest debt, consider making at least one extra payment on your credit cards per month. If you have multiple balances, here are two ways to knock them down:
• The snowball method With this approach, you make your extra payment on your smallest debt, while maintaining minimum payments on the others. When that debt is paid off, you focus on paying off the next-smallest debt, and so on.
• The avalanche method Here, you put your extra payment towards the debt with the highest interest rate, while making minimum payments on the others. When that debt is paid off, you focus on the debt with the next-highest rate, and so on. The money you save in interest payments can then go towards saving (and earning interest).
5. Audit Your Subscriptions
There’s a good chance you are paying monthly for things you no longer need or use. To find out, review your credit card or bank statement to see what subscriptions services you’re paying for each month. Do you have cable, but only watch streaming services like Netflix and Hulu? Are you paying for streaming services you never, or rarely, watch? You might also audit your music services — if you are paying for more than one, you might keep your fave and get rid of the others.
The monthly fee for each streaming service may seem small but, when you pay it every month, year after year, it can seriously add up.
Recommended: How to Track Your Monthly Expenses: Step-by-Step Guide
6. Put a Free Budgeting App on Your Phone
Keeping tabs on how much is going in and going out of your accounts is crucial to financial wellness. But who wants to spend hours coming through statements? A budgeting app does the work for you, and many are free (at least for the basic service).
Popular budgeting apps, like Goodbudget, EveryDollar, and PocketGuard, allow you to connect with your financial accounts (including bank accounts, credit cards, and investment accounts) and give you a bird’s eye view of your finances. Right from your phone, you can see what’s in your bank account, your current credit card balance, what you’re spending the most money on, how your spending compares to last month, and more. This can be eye-opening and help you make smarter financial decisions.
💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.
7. Practice the 3-Day Rule
Online shopping has made it easier than ever to impulse buy. You’re only one click away from a new jacket, blender, or television. So try this smart spending hack: Whenever you see something you want to buy, either online or in-person, DO NOT buy it that day. Put the purchase on pause for at least three days. Tell yourself that if, after three days, you still want the item, and you can afford it, you’ll buy it. This gives you time to reflect. You may well decide that you don’t need or want the item that badly. If you’re worried about missing a “one-day” or “flash” sale, don’t — retailers run sales all the time.
Recommended: How to Stop Spending Money: 7 Strategies to Curb Overspending
8. Use Cash
This may sound counterintuitive, but spending cash can actually help you save money. The reason: When you spend in cash, you actually have to physically give up your money when you spend it, unlike with a credit or debit card.
You might try taking out a set amount of money for discretionary spending for the week, and when the money is done, you’re done spending. Or, consider using the envelope budgeting system, where you take out a certain amount of cash for the week and divide it into envelopes for food, gas, etc. As you see the money go down in each envelope, you’ll have to think hard about every purchase.
9. Gradually Boost Retirement Savings
. You may have heard that you “should” be putting 15% of your income into your 401(k) or other retirement fund each year. It’s a solid goal. But for many young people, it may not be remotely realistic. That said, you shouldn’t give up on the whole idea. Why not try baby steps? You might start by putting just 1% of each paycheck into your retirement fund, then increase it by 1% every three to six months.
While 1% is a small percentage of your annual earnings today, after 20 or 30 years it can make a big difference in your account balance when you retire. That’s because the longer you give your money a chance to grow, the better.
Recommended: When Should You Start Saving for Retirement?
The Takeaway
Getting a better handle on your finances may perennially be on your to-do list. The problem is that this goal can seem too vague and too overwhelming to even know where to begin. The good news is that you don’t have to overhaul your personal finances overnight. Simply adopting some smart money habits (or hacks) can snowball into long-term financial stability and wealth. And there’s no better time to start than today.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with up to 4.60% APY on SoFi Checking and Savings.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.