Prepare yourself — it’s not a small number.
- It’s important to have savings to fall back on for near-term expenses as well as retirement.
- Americans think it takes over half a million dollars to reach the point of being financially secure.
- There are things you can do to build up your savings, such as budgeting and working a side gig.
Are you in a financially healthy place? If you’re able to cover your living costs with ease, you don’t have unhealthy debt like a credit card balance hanging over your head, and you’re consistently socking money away in savings, then it’s fair to assume that you’re in a pretty good spot. But even if you have a nice amount of savings to your name, you might still have some work to do.
Recent data from Personal Capital found that Americans think it takes $529,900 in savings to be considered financially healthy. But whether or not you agree, there are some key steps you can take to grow your savings.
1. Get on a budget
Following a budget is a great way to track your spending and see where your money is going month after month. That could help lead to smarter spending decisions — and to freeing up more money to save. If you’re new to budgeting, there are different budgeting apps you can use to organize your finances and keep tabs on your expenses. Or, you can write out a budget on paper or use a spreadsheet program — whatever’s easiest for you.
2. Cut back on spending
If you’re looking to boost your savings, you’ll need to spend less than you earn. Take a look at your non-essential expenses and see if there are any you can cut without causing yourself too much anguish. If you pay $50 a month for a gym membership but you only go once a week at most, that’s an expense that may be easy enough to drop.
3. Avoid costly debt
The more money you spend on credit card interest, the less you’ll have on hand to put into savings. Aim to steer clear of credit card debt, and if you have existing debt, curb your spending so you can reallocate some cash. Paying off debt will go a long way to freeing you up financially.
4. Pick up a side hustle
It may be that your current paycheck gets eaten up by living costs, leaving you with little money left over to put into the bank. If that’s the case, a side hustle could be your ticket to growing your savings. Since your side gig earnings won’t be earmarked for bills, you’ll have a prime opportunity to put that money to good use.
Do you really need $529,900 to be financially healthy?
As a general rule, you should have enough money in your savings account to cover three to six months of essential bills. That’s your emergency fund. From there, it’s good to consistently save 15% to 20% of your income for retirement so you have enough money to cover your future bills once you stop working.
If you’re hitting those goals, then you may be in a perfectly good financial position, even if your total savings balance is nowhere close to $529,900. As such, you should really look at that number as a point of information rather than a sum you must aspire to. Instead, assess your own needs and goals, and come up with a savings target that will make you feel good about the state of your finances.
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