How to Rebuild Your Savings in 2022.
If you’ve noticed a drop in your overall savings during the past 18 months, you’re not alone. From unemployment, to less than stellar investment growth, overspending in certain categories or households moving from two incomes to one, the pandemic upended the personal finances of millions of people.
As the economy starts to recover, now is a good time to focus on rebuilding your savings so you can get your finances back on track as you move forward toward your goals. These steps and tips can help you get there.
Step 1: Review your financial situation
“One of the first steps to take is to do a financial review of where you are currently,” explains Kelly Collins, Regional Retail Banking Director at Commerce Bank. “This includes assessing your short-term and long-term expenses in order to realign your financial goals,” she adds.
“Taking a look at your current situation to understand what’s happening now — and what’s on the horizon — is an important step toward incorporating your goals into a budget that includes your savings contributions.” She adds that it’s perfectly okay to start with small steps; the important thing is to just start by doing something.
As you review your budget and examine your income versus expenses, look for any spending categories that may need to be updated. For instance, has your grocery budget increased due to higher prices for food and beverages? Will you need to resume making student loan payments once the temporary pause is lifted? Revising your budget as needed can help you stay on track to cover essential expenses and reduce unnecessary spending as you work toward rebuilding your savings.
Step 2: Re-examine your financial goals
This is a good time to review your short-term or long-term goals. To get back on track, make sure your savings aims are tangible, and that your overall plan is specific and realistic. For example, commit to putting $50 into an emergency fund each month or contributing enough to your 401(k) plan to take advantage of a matching employer contribution.
Collins recommends thinking about the financial categories that are most important to you. “That can help you figure out what to save and how much,” she says. For example, is there one big, specific thing you’re saving for, like a new car or down payment for a home? Taking that bucket list vacation that was postponed by the pandemic?
Step 3: Prioritize savings goals
You’re not alone if you have multiple savings goals, and putting them into different categories can also help you prioritize those dreams, says Collins.
“Knowing what to save for and how much to save can depend a lot on your life stage, as well,” she adds. For example, someone in their early 20s may not need to focus as much on saving for retirement as someone in their 40s or 50s.
However, she adds, “Regardless of your life stage, having an emergency savings account that you can access to cover unexpected bills should be a top priority.” If you don’t have an emergency fund, now is the time to start one. And if you depleted yours during the pandemic, now is the time to rebuild it.
In addition to building a financial cushion with an emergency savings account, continue to pay down debt to free up more money that you can put toward your other goals. And if you decreased or stopped retirement account contributions during the pandemic, focus on restarting those and bolstering your retirement savings.
Remember, even in small increments, saving for your goals helps you establish healthy financial habits for the year ahead and moves you closer to your big goals.
How to find money to put toward your savings goals
From adjusting lifestyle habits to trimming non-essential expenses, try these tips to help boost your savings.
If you’re doing certain activities less frequently, like driving, eating out, traveling or going to concerts, put that money toward your savings goals.
Look for non-essential categories to trim from your budget, like subscriptions, food delivery or streaming channels. As you consider expenses to cut, rank them from highest to lowest priority and start cutting from the bottom of the list.
Put any additional funds like tax refunds, bonuses or cash rebates toward your savings goals.
Consolidate or refinance your mortgage, car or other loans to reduce your monthly expenses.
If you can’t find areas to cut back, look for ways to increase your income, even temporarily, like a part-time job or selling items you no longer need.
Simple saving habits
To make saving as painless as possible, Collins recommends setting up autopay from your checking account to your savings account on the same day you get your paycheck. Or, set up a portion of your direct deposit paycheck to go into a savings account automatically. As far as where to save, Collins encourages savings accounts without fees or those that offer rewards for saving, like Commerce Bank’s myRewards Savings account.
For more information about savings account options or to learn more about saving for specific goals like education or retirement, reach out to us on the Commerce Bank CONNECT® app. It’s our exclusive app that lets you interact directly with a Commerce Bank team member who can help answer your questions and provide personalized guidance and advice to fit your needs and goals.