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- The vast majority of Americans report concerns over inflation and economic instability.
- Proactively saving money can yield the financial cushion you need to feel more secure.
- Strategies like budgeting, reducing unnecessary expenses, paying down debt, and capitalizing on unique discounts are useful.
If you're concerned about the state of the economy, you aren't alone. A 2023 survey found that 82% of Americans worry about the impact of inflation. And two in three adults fear the next recession is just months away.
In the face of financial uncertainty, it's always wise to reexamine your plan for saving. What steps can you take to shore up against the unknown? How can you maximize your savings and your peace of mind?
1. Get intentional about saving (and spending)
Saving more money means widening the gap between your income and your expenses.
Knowing those numbers is the first step. Try tracking money in and money out for at least one month. Then, use what you've learned to create a strategic plan for your finances — a simple but powerful budget.
Next, get creative in reducing those expenses:
- Eliminate: Consider unused subscriptions, dusty gym membership cards, food waste, and more.
- Spend smarter: Shop around for better insurance rates. Switch to cheaper plans for cable, cell service, and membership sites if you're paying for features you don't use.
- Reduce: Where are you willing to cut back to boost savings? Think about making more meals at home, taking a staycation, spending less on gifts, and more.
2. Take advantage of compound interest
Two amazing allies when it comes to saving are time and compound interest.
When you leave money in an account that offers compound interest, you reap savings exponentially over time. What starts as a few dollars of interest transforms over the years into hundreds or even hundreds of thousands of dollars.
Savings accounts, money market accounts, and CDs are ideal tools for reaping compound interest on short-term savings. Consider these accounts for money used for paying bills, traveling next summer, or stashing for a rainy day.
"The most important first step is moving whatever funds you have to save to a separate account to avoid the temptation of spending unnecessarily. Beyond that, it often comes down to a tradeoff between flexibility and earning the highest guaranteed rates possible," said Jaspreet Chawla, senior vice president of savings products at Navy Federal Credit Union.
"Your standard savings account will generally have a lower rate than a money market account but will allow more options for utility. Certificates, particularly in the 3-month to 18-month range in today's environment, give a higher guaranteed return but lack the option for immediate access without penalty."
Longer-term savings goals might include a college fund for your child or your own retirement savings. For these goals, consider taking on more risk in exchange for higher rates of return with specialized investment accounts. For college, try a 529 Plan or Coverdell ESA. For retirement, explore 401(k) plans, IRAs, Roth IRAs, and dedicated accounts for the self-employed.
"I always recommend meeting with a financial advisor at your bank or credit union because they can help you evaluate the possible solutions to meet your financial needs," Chawla added.
3. Prepare for the unexpected
At some point, an unforeseen expense will come your way. It may be a necessary repair for your home or car, a medical bill, or even a lost job.
Facing that event without cash on hand triggers two more problems you definitely don't need — added stress and the possibility of being forced into costly debt.
Fortunately, an emergency fund can carry you smoothly over many financial bumps. And you can start building yours quickly:
- Calculate the right savings target for your family's needs.
- Open a dedicated, high-interest savings account specifically for your fund.
- Automate deposits each month or every pay period. (Pro tip: Be sure to include this recurring contribution in your budget.)
- Make additional, one-off deposits when you come into "extra" money — a work bonus, commission, tax refund, or cash gift.
4. Get strategic with your debt
People often overlook the high cost of interest payments made every month on debt. However, reducing or eliminating those payments frees up cash for extra savings.
First, look at every account on which you carry a balance. This may include credit cards, personal loans, car loans, a mortgage, and student loans.
Next, examine your interest rates. Are they fixed at a low rate? Variable and subject to climb? Fixed at a rate that's costing you dearly?
Assess your options for the debts with the highest interest rates:
- Refinance to a lower rate.
- Consolidate multiple loans into a single, lower-interest loan.
- Transfer your balance to a 0% APR card.
- Explore repayment strategies for student loans.
- Commit to the debt avalanche or debt snowball system for accelerated repayment.
- Work with a personal finance management expert for personalized financial guidance.
5. Capitalize on benefits for service members
If you're a current or retired service member — or if you're part of a military family — there are a variety of exclusive savings that may be available to you:
- Competitive mortgages with VA home loans, which offer fixed interest rates and may include penalty waivers, caps on closing costs, no money down, and no requirement for private mortgage insurance.
- Educational discounts through the Post-9/11 GI Bill, a MyCaa Scholarship, and the Survivors' and Dependents' Educational Assistance program.
- Travel savings through the Space-A Travel program and discounts through many hotels, airlines, rental car companies, cruise ships, amusement parks, and more.
- Retailer military discounts offered through hundreds of online businesses and brick-and-mortar stores.
- Special programs through your credit union that provide valuable discounts and exclusive levels of cash back when you shop popular retailers with your credit card.
"While points and cash back are the primary benefits of using a credit card, many cards have other often overlooked and underused benefits that can save you time and money," says Russell Nelson, manager of the credit card products acquisition team at Navy Federal Credit Union.
"For example, maximize benefits by shopping through your card issuer's online shopping portal. By doing so, you can earn extra rewards beyond what you'd get for purchasing in-store or directly from a retailer's website."
No one knows for sure what the economic landscape will look like next year or even next month. But there are steps you can take to fortify your finances. With the right strategies, you can increase your personal savings and better protect your family.
Ready to start saving? Set up the accounts you need at Navy Federal Credit Union.
This sponsored post was created by Insider Studios with Navy Federal Credit Union. Navy Federal Credit Union is federally insured by NCUA. Equal Housing Lender.