I always say the perfect time to start saving money is now, and “now” it’s a new year. I’m not a big fan of New Year’s resolutions, however I’m also not above exploiting this old custom to convince folks to save money. The New Year is a perfect time review your savings from the previous year, consider any changes you want to make to your savings, and set savings goals for the year ahead. So put that noisemaker down and let’s go over some New Years savings resolutions for 2018.
For many people a company sponsored 401(k) plan is their primary retirement savings. If your company offers a 401(k) with a percentage match, participation is a no-brainer. In the past year I convinced 2 of my coworkers to finally start contributing to their 401(k) and both admitted the slight reduction in take-home pay was painless. If you’re unsure how much to contribute to your 401(k) I would suggest starting with the full company match. By contributing less than the full match you’re leaving money on the table that you’ll never get another shot at.
If you’re already contributing to a 401(k) a New Year is the perfect time to increase your contribution. A 1% increase will be practically unnoticed and many plans allow you to opt-in to have this increase done automatically every year. I prefer to do it myself because I’m a control freak. This is a simple way to increase your savings year-to-year.
A New Year is also the perfect time to review your 401(k) plan. Don’t be one of those people who checks their 401(k) balance after every paycheck. Once or twice a year should be sufficient, especially if you’re a long-term investor (retirement is many years away). If you feel you’re not getting an adequate return on your investment, consider re-balancing your portfolio. As long as I’m earning a decent return (above 5%), my philosophy is “set it and forget it.”
If you have next-to-nothing in your personal savings, you’re not alone. As with just about any endeavor, getting started is always the hardest part. Setting a yearly savings goal and sticking to it can be a great way to start or grow your savings. I prefer simplicity, a $1,000 savings goal equals $20/week. If you feel that’s too ambitious, set a goal of $500 and save $10/week. If gimmicks excite you, try the 52-week money challenge. Just stop procrastinating and start saving, then push yourself to save even more the following year.
Once you’ve saved up a couple grand and your savings are more than just an emergency fund, it’s time to make that money work for you. I’ve realized a lot of people just let their savings languish in a typical savings account earning a measly 0.06% interest! Instead, take the money you saved last year and stash it away in a Certificate of Deposit. CDs are relatively risk-free (Please make sure the financial institution you choose is insured by the FDIC) and while current interest rates aren’t anything to get excited about, they’re still significantly higher than a savings account.
For the best CD interest rates check out credit unions and online banks. Traditional banks (Bank of America, Chase, etc.) offer insultingly low interest rates and aren’t worth your time. Also, choose a long-term CD of 5 years over shorter terms. The longer the term, the higher the interest rate. If you’re worried about locking your money away for a long time, find a CD with a low penalty for early withdrawal. Look for an early withdrawal penalty between 3 to 6 months of dividends earned. A 5-year CD withdrawn after 1 year, incurring a penalty of 6 months of dividends earned, would still earn more money than a 1-year CD withdrawn at maturity. I don’t advise doing this on a regular basis, but don’t let the possibility of early withdrawal be a barrier to getting the best interest rate on a CD.
Passive Revenue Streams, Side Hustles, and More
To really grow your savings, think about ways to earn money beyond your weekly paycheck. While you can Google “passive revenue streams” and “side hustles” for tons of ideas, I’ll tell you about 2 that work for me with no special skills or upfront investment required.
You haven’t really lived in LA until you sign-up at Central Casting. Background acting is a fun and easy way to earn some extra cash. It doesn’t require any special skills other than being able to act like a human. Paychecks vary depending on how many hours you work and other factors, but expect to make at least $100/day. You can also almost always expect to be fed at least 1 meal on set. This is the perfect gig for days off/spare time. As with any job, you’re expected to arrive on-time and be professional. From carnivals to shoot-outs, every day on set is a unique experience making background acting an exciting side hustle.
If you’re opinionated, focus groups are a great way to supplement your income. I’ve worked with both Focus Pointe Global (formerly Trotta Associates) and Atkins Research Global. By joining their databases you could be selected to participate in anything from an hour long group discussion about cell phones to an all day mock trial. Compensation usually begins around $100 and goes up from there. These businesses depend on you so always arrive on-time and participate, otherwise you won’t be asked to return for future opportunities.
The New Year is a perfect time to begin or expand your savings. My suggestions aren’t rocket science, they’re simple actions anyone can take to jumpstart their savings. Set your goals, follow through, and you’ll be amazed at what you can accomplish! (DISCLAIMER: I am not a professional financial adviser and all financial investments involve risk.) Do you have any frugal resolutions for the New Year? I’d love to hear all about them in the comments section.