How to save $1,776 over the next year
By Amanda Dixon
Being an American means more than hosting backyard barbecues, enjoying a slice of apple pie and chugging a beverage at a baseball game.
We value life, liberty and the pursuit of happiness. Though our ancestors come from different lands, many of us strive for the same thing: a home, a couple of kids running around and of course, a dog.
Achieving the American dream is about reaching a certain financial status. But unfortunately, many of us try to get there without taking the time to grow our savings. Nearly 3 in 10 U.S. adults have no emergency savings to fall back on.
This Fourth of July, while you’re cranking up the grill and waiting for the fireworks to begin, consider what it’ll take to become financially independent. Now that we’re more than halfway through the year, this could be a good time to review your goals and aim for a specific amount of savings, like, say, $1,776.
In honor of our nation that was founded more than two centuries ago on July 4, 1776, here’s what to do if you’re hoping to save $1,776 over the next year.
1. Automate your savings
There are multiple ways to approach the goal of saving $1,776. If you break it down, that requires you to save $148 per month and about $34 per week.
Working to set aside small amounts of money regularly is better than waiting until the end of the year to see what you have left over.
You could manually set aside $148 or you could have that amount of money taken out of your paycheck automatically. Just as you have money pulled and added to your 401(k), you can have certain funds deposited directly into a savings account, says Tad Hill, founder and president of Freedom Financial Group.
2. Pay down debt
Saving $1,776 may seem particularly daunting if you have a significant amount of debt to pay off. Whether you’re drowning under a sea of credit card debt or personal loans, it’s important to be proactive about dumping your debt. Some of the money you’re using to pay your bills could easily be redirected into an account for savings.
If you have student loans you’ve yet to pay off, adjusting your repayment plan could be an option. If you’re one of the folks with federal loans, see if you can qualify for an income-driven repayment plan. You’ll eventually have to pay everything off, but a lower monthly payment amount can leave room in your budget for savings.
3. Lower your interest rates
Lowering your interest rate is an even better way to reduce debt and save more money. If you could save 10 percent on $10,000, for example, you save $1,000.
“That’s $1,000 you just saved, and guess what? You didn’t do anything,” says Michael Foguth, founder of Foguth Financial Group in Brighton, Michigan.
When you’re trying to make your case for a lower interest rate or even debt consolidation, having a good credit score helps. But sometimes, it’s just a matter of shopping around or just asking, Foguth says.
Research from CreditCards.com shows that more than half (56 percent) of credit card holders who asked for a lower interest rate received one, says industry analyst Ted Rossman. Coming from a high-income household or being a long-time customer with a good track record can also help you make your case for a lower APR, especially if you compare offers and find a better rate.
“If you can say, ‘I’ve been a loyal customer for many years and I want to stay with your company, but I’m paying you 20 percent interest and Company X is offering me a 15 percent rate,’ your chances of success go up dramatically,” Rossman says.
Other options, he adds, include checking out credit unions, getting a personal loan and leaving your rewards credit card at home, since these cards tend to charge higher interest rates. Check out balance transfer cards as well that are tied to 0 percent interest offers.
4. Find ways to cut back
In the process of trying to save more money, consider reviewing your budget and seeing if there are any expenses you could get rid of. See if there are any gym memberships, subscriptions or recurring purchases worth eliminating.
“When I recommend for people to save or do things, I try not to disrupt lifestyle too much,” Foguth says. Rather than changing your lifestyle by giving up your morning coffee, look at other ways you’re spending money that’s truly wasteful, he says.
An easy fix is adjusting the amount of money you’re spending on food. A recent survey found that nearly 4 in 10 Americans dine out at least three times a week. In total, Americans spend an average of $2,443 per year on restaurant meals and takeout food.
Jill Kismet, founder of a financial planning company called Plan for Joy, recommends meal prepping or using sites that allow you to create grocery lists using specific recipes. Once you get to the grocery store, don’t buy anything that isn’t on your list, she says.
Leisa Aiken, founder of Veo Financial Counsel in Chicago, is in favor of substitution rather than deprivation. Saving money, she says, can easily be done by packing your lunch for work or taking public transit a few times a week rather than getting in an Uber.
5. Get a side hustle
For families who are stretched thin, saving money may not seem possible without finding an additional source of income. A side hustle can help you make extra money. And depending on what it involves, it may not require you to give up too much of your free time.
According to a Bankrate survey, 27 percent of working Americans have a side job specifically because they need to make extra money in order to boost their savings.
6. Open a high-yield savings account
Regardless of how you decide to save $1,776, what’s just as important is where you keep your savings. Opting for a high-yield savings account offered by an online bank over a brick-and-mortar bank account is worth considering. And if you’re struggling to reach your goal, the extra interest could push you over the edge.
Some banks, such as Ally Bank and Marcus, have already lowered the yields tied to their savings accounts ahead of the next Federal Reserve meeting in July. Still, it’s easy to find accounts paying well over 2 percent APY.
In smaller print is the catch: When the 0% interest period ends, your rate for any balance you have left is going to shoot back up to 18-22%. If you’re not downright religious about paying off your balance every month, these offers can be tricky to navigate. Sometimes trickier than they are worth.
But a new type of credit card offer dropped into my inbox a few weeks ago. One I hadn’t encountered before. One for an interest rate that had not entered my orbit in at least a decade.
Behold the kind, generous offer: I can enjoy 8.99% interest on new purchases made made from June 1 right up to the start of the holiday shopping season. On December 1, my interest rate will return to the norm for me, which right now is 18.24%. There’s no sneaky deferred interest here that can plague some other credit offers, but I will have to pay the higher interest rate on any new purchases that have balances remaining at the end of the promo period.
I knew what this was: a clever tactic to get me to spend more money on a card that usually lies ignored at the bottom of the plastic pile until I need to buy a ticket on a very specific airline. Just like your ex isn’t actually concerned about your sleep habits when he texts, “U up?,” credit issuers don’t just toss out lower interest rates for fun. They are, in fact, checking to see if I am up.
But it would not be enough for me to simply write off this offer. I called upon a few credit card experts to remind me that this promotional APR that seemed temptingly better than the standard, agonizingly inflated APR, could be dangerous.
Even though this offer was “especially for” me, Michael Foguth of Foguth Financial Group confirmed that the offer I received wasn’t personal at all. It’s more likely that the institution has capital it wants to loan, he said. “It’s cheaper for them to go to existing clientele and have them spend more money than to bring in new clients,” he said. “The cost of acquisition is a postcard stamp or less.”
What about that lower interest rate? Is it worth using that card a bit more during the promo window?
Sure, Foguth said, if you’re looking to switch up your primary card for the summer. My card in question does offer rewards, so changing up the card I typically reach for could diversify my reward earnings. (I did activate that offer with just one click, in case you’re wondering. It was really that easy.) But Foguth went back to the simplest rule of credit card use: “Even if you have an introductory rate of 3%, you should still do your best to pay it off,” before the introductory period ends, he said.