As a working homemaker, I value every dollar earned. A large portion of my life is spent outside of the home making sure I can contribute to expenses and my family can thrive. With inflation on the rise with no signs of letting up, earning a paycheck on its own is not enough right now. We need to cut back on some things. Navigating frugality can be difficult at first- I have created a list of ways that we can stretch our dollars and embrace a more simplistic way of living. Not everything on this list will work for everyone so simply take from it what you find valuable and leave the rest!
I have created five different categories we can find some savings in and today we will focus on the first one, banking. Before we explore frugality within banking we need to reflect on the reasons for living more frugally. Find your why. Identify what motivates you to save and use that to hold yourself accountable to your goals. For my husband and I it is moving from our condo into a stand alone home (Which we just did, new post on moving coming soon!!). We had given ourselves a generous timeline to work with and looked at our budget to realistically project how much we can save within the amount of time we allowed ourselves. With any goal, it is important that we are patient with ourselves, but also firm on our goals and why we are doing what we are doing. I advise you to let family and friends know that you are looking to save money, and whether you tell them your motivation is up to you. I find that vocalizing your goals helps those close to you understand why going out for dinner and drinks might be a no this time. With that said- let’s talk about the first area of frugality and savings, as previously mentioned: banking.
Most of us already have bank accounts and loans, but are we really utilizing all of the tools and services that are available to us? Likely not. I do have experience in both loans and personal banking having worked for a credit union as well as a large commercial bank. I genuinely love to talk about all of the fun ways we can find more money when it comes to our bank accounts.
- Calculate your monthly earnings vs spending- determine where your money is going and what categories can be scaled back on
Would it be a blog post about savings if I didn’t first mention taking an inventory of exactly where your money is going? I recommend setting a filter on your online statements to show the past three months worth of transactions. How much is coming in, how much is going out, and where is it going to? From here we have a more clear image of what purchases are essential and what we can begin to scale back on. Look back to your motivation and see if your purchases align with that goal. For some people the gym might be a frivolous expense, but for others it could be an essential healthcare cost. Only you can decide what spending is necessary for your life- but this is the best way to begin to sort it out.
- Pay for everything with your credit card
I can already feel the icy cold hands of Dave Ramsey gripping my throat. THIS IS CONTROVERSIAL. Hear me out. Get yourself a credit card that has perks, namely cash back. Every dollar spent gives you points that you then redeem for a deposit into your account or a check in the mail made payable to YOU! If you are only purchasing the essentials that you’ve identified from the first tip then it is money that is sitting in your checking account anyways. This time, though, you will be getting an incentive for spending it. PLEASE, oh please make sure to pay your balance off in full well before your due date, see tip 3 for more.
- Pay off your credit cards IN FULL before your payment is due
When you have your balance paid in full before your payment due date then there is nothing on the card to charge interest to. You will be getting all of the rewards (cash back, baby) that your credit card has to offer with no risk of paying high interest rates. I personally like to just transfer funds over from my account to the card as soon as I see it has been posted. This helps me to avoid spending more than I actually have and keeps my attention on the card balance being at 0 throughout the month. Typically it is a weekly practice, Monday mornings I will sit down and reflect on my spending throughout the week before. I will evaluate whether I was able to stay within my budget, set new goals, and pay my credit card completely off. If you are at all worried about overspending or missing your payment date I would highly recommend a weekly evaluation to ensure you are staying on track!
- Get a High Yield savings account
If your money is sitting in a regular savings account, it is not working for you. Dividend rates for regular savings accounts are typically around 0.01% APY (annual percentage yield). Not so attractive. A high yield savings account can be anywhere from 0.05% to 0.08%- not a ton, but most certainly more than a regular savings account. If you do already have a fair chunk of funds stashed away, it would be beneficial to look into a money market account or a jumbo mma (which typically have minimum balance requirements) to earn even more! Shop around at different banks or credit unions to see who has the best rates.
- Refinance your loans- car, house, home equity for better rates
Refinancing can be a pain which includes some paperwork on your end as well as a hard pull to the credit. However, if the rates are better than they were when you purchased your assets then it might be worth it to investigate this option! Typically with car refinances, the bank you are currently financed with will not refinance you for a lower rate so you will likely have to refinance to another financial institution. That switch will likely come with a secretary of state re-title fee to list your new bank as lien-holder- (in Illinois that is around $95). Fees are never fun, but it is a small sacrifice compared to the hundreds you will be saving over the life of the loan. As far as home loans go, it is best to speak to an expert who can more accurately quote you on rates and potential savings. If you plan on living in your home for quite a while it might be a good idea to refinance for a lower rate at the same term you originally purchased your home for. This wouldn’t save you on the back end of the loan but it would save you on your monthly payments which could free up some savings $$$ to set aside monthly.
- Learn about your amortization schedule for your loans
What a weird and intimidating word. Don’t let it freak you out though because it can help you pay off your loans sooner while paying less interest over the life of your loans! Typically, most car and personal loans are simple interest. This means interest is accrued daily. Every time you make a payment the interest accrued daily will decrease. That said- the more frequently you make payments, the less interest you will have accruing in between payments. “But Sophia- I cannot afford to be making multiple car payments in a month”. I hear you, neither can I, nobody that I know can. This is why it is incredibly beneficial for you to make a half car payment on a bi-weekly schedule. In most cases, following this payment schedule will set you one full payment ahead of your loan term by the end of a year of payments this way. Call your financial institution beforehand to make sure they are aware of the new way you will be paying them so they can allocate the funds towards your monthly payment rather than just toward principal. You can and should do a large principal payment if that is something you can afford to get a chunk of the loan paid off with no additional interest- but if you do please keep the amortization schedule in mind. Make any large principal payments the same day or the day after your regular monthly payment is posted. This way there are no days in between those payments for daily interest to accrue, making your payment go further!
- Take advantage of bank bonus offers
Different banks will regularly run promotions or bonuses where when you open a new account with them and bring over a certain dollar amount, they will give you a cash bonus to the new account! Typically the funds will have to remain at the amount the bank has specified and they will have to sit in the account for usually 60-90 days at minimum. From there they will deposit the bonus funds and you are free to either keep your account with them or close it out and take your funds elsewhere. My one word of caution though- banks usually will do a credit inquiry and run a search called a chexsystems report to make sure you do not have delinquencies or unpaid fees with other banks beforehand so make sure you are all squared away before trying this tip. Additionally, most banks will only allow you to participate in their promotion once so use this sparingly.
- Utilize specialized savings accounts
This one works really well with the first tip. After you have determined what spending is essential to you, work with your bank to set up special savings accounts. Mine, for example are: Clothes, Home, Pets, Vacation, Moving (which is no longer needed haha), Holidays, and Emergency.
Determine how much you would like to allocate to each account monthly. Once you spend $ on one of these categories, use the funds from that specific savings account to pay yourself back (or pay the credit card balance for that purchase to get that sweet, sweet cash back). This helps me even further to stay within my budget and to see exactly what I have given myself as an allowance for each area!
- Start planning for retirement
I’m serious. Planning for retirement is overlooked by SO MANY PEOPLE until they are older and wanting to begin to wind down. Planning is essential to achieving your retirement goals within the timeline that YOU establish! Open yourself an IRA account- do your research on if a traditional or roth would be best for you and get that going. If your job offers a 401k or an equivalent with a matching program, TAKE ADVANTAGE!!! This is free money from your employer and all you have to do is put a small % of your check into the account. From there they will match your contribution up to a certain percentage. This is an easy way to set yourself up for success and the best part is, if you have recurring contributions set up, you will never notice the funds going elsewhere.
- Rollover any leftover money into savings
This one is super simple and takes no additional effort from you. Take a note of how much you have in your checking account the day before your paycheck hits. Once your check clears your account, transfer the dollar amount you had before your check hit directly into your savings! If you are like me, once something is in savings it no longer exists as spendable income. Out of sight, out of mind! This tip is so simple but has by far been the quickest way for me to save a lot more money in a lot less time.
To wrap things up, saving your money and living frugally do not mean you have to sacrifice everything you love. You can take baby steps today that will make a world of a difference for you in the long run! Changing the way you look at spending and saving is an excellent way to create a better relationship with your money and begin to have a healthier financial picture.
Let me know your thoughts and if you have any frugal banking tips that you’d like to share!
Until next time!
-Sophia
The Working Homemaker 