3 smart ways to save to build wealth in 2024

Building wealth requires saving money, which can be harder than it looks. In fact, according to the Bureau of Economic Analysis, as of December 2023, Americans’ personal savings rate is only 3.7%.

The good news is that there are some simple techniques you can implement to save money and increase your net worth more easily. Here are three of them.

1. Reduce fixed costs

When trying to save, many people try to save by reducing their discretionary expenses. There are things you can choose to spend money on each month, such as getting a coffee at Starbucks, eating out, or buying new shoes or a comic book.

The problem is that when you cut these costs, you have to keep making sacrifices even if you don’t get much benefit from it. For example, saving $4 per day on coffee could save you up to an additional $124 per month. It’s not bad, but many A sacrifice was needed to save it.

Instead of constantly trying to deprive yourself of something you enjoy, it’s much easier and more effective to try to cut back on something big. determined expense. That way you can make one Cut once and adjust. For example, renting a used car instead of a new one can save you an average of $193 per month.

Choosing a cheaper car or a cheaper home are just two ways to save on fixed costs. You could cancel your gym membership, refinance your debt, get cheaper insurance, or even cancel your cable. The key is to find as many big recurring costs as possible and find ways to change them. Those It costs more than it takes away from enjoyable spending.

2. Automate your savings

Making your savings automatic is also a smart way to save. As you know, you don’t always want to force yourself to move your money into savings. Because it’s too tempting to spend money instead. On the other hand, if you have a certain amount of money automatically moved to a savings account, you don’t have to worry about choosing to save it. The money will flow where it is needed.

You can sign up to have your paycheck automatically transferred to your savings the day you receive it. Most banks make this easy. Once you do that, you’ll be much less likely to go back and cancel, and you’ll quickly adjust to living off the money left in your checking account.

3. Choose an account that suits your money

Lastly, you’ll want to make sure you’re investing your savings in the right places. For example, while the average interest rate on traditional savings accounts is only 0.47%, high-yield savings accounts offer the opportunity to earn more than 5.00% in today’s markets. If you know you won’t need the money for a while, you may get better results by investing it in a certificate of deposit or brokerage account based on your investment schedule.

CDs can secure today’s high interest rates and often offer better returns than savings accounts, but you must be allowed to keep your money in the bank for the duration of the CD (this can be months or years, depending on the terms). Select CD). And you can earn much higher returns by investing with a brokerage account, with the S&P 500 providing an average annual return of 10% over the long term. Of course, you only want to invest if you won’t need the money you save for at least five years. Otherwise, you will face the risk of big losses if you buy or sell during bad times.

By taking these steps, you can save a significant amount in 2024 and make real progress on your wealth-building journey.

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