Think back to what the stock market looked like to you in March 2020, aka, the apocalypse. Did it look like:
A.) The biggest bargain sale you’ve ever seen in your lifetime?
or
B.) A burning pit of money that was about to incinerate your life’s savings?
If you answered “B,” you probably have a low risk tolerance. You worry more about losing money than missing out on the opportunity to make more of it.
Being cautious about how you invest your money is a good thing. But if you’re so risk-averse that you avoid investing altogether, you’re putting your money at greater risk than you think.
Do Safe Investments Actually Exist?
When you think about the risks of investing, you probably think about losing principal, i.e., the original amount you invested. If you keep your money in a bank account, there’s virtually no chance of that happening because deposits of up to $250,000 are FDIC insured.
But consider that the average savings account pays just 0.05% APY, while in 2019, inflation was about 2.3%.
So while you’re not at risk of losing principal, you still face purchasing power risk, which is the risk that your money loses value. Your money needs to earn enough to keep up with inflation to avoid losing purchasing power. If inflation continues at 2.3%, buying $100 worth of groceries will cost you $102.30 a year from now. If you’re saving over decades toward retirement, you’ll be able to buy a whole lot less groceries in your golden years.
There’s also the risk of missed opportunity. By playing it too safe, you’re unlikely to earn the returns you need to grow into a sufficient nest egg.
Though there’s no such thing as a risk-free investment, there are plenty of safe ways to invest your money.
8 Low-Risk Investments for People Who Hate Losing Money
Here are eight options that are good for conservative investors. (Spoiler: Gold, bitcoin and penny stocks did not make our list.
1. CDs
If you have cash you won’t need for a while, investing in a CD, or certificate of deposit, is a good way to earn more interest than you’d get with a regular bank account.
You get a fixed interest rate as long as you don’t withdraw your money before the maturity date. Typically, the longer the duration, the higher the interest rate.
Since they’re FDIC insured, CDs are among the safest investments in existence. But low risk translates to low rewards. Those low interest rates for borrowers translate to lower APYs for money we save at a bank. Even for five-year CDs, the best APYs are just over 1%.
You also risk losing your interest and even some principal if you need to withdraw money early.
2. Money Market Funds
Not to be confused with money market accounts, money market funds are actually mutual funds that invest in low-risk, short-term debts, such as CDs and U.S. Treasurys. (More on those shortly.)
The returns are often on par with CD interest rates. One advantage: It’s a liquid investment, which means you can cash out at any time. But because they aren’t FDIC insured, they can technically lose principal, though they’re considered extraordinarily safe.
3. Treasury Inflation Protected Securities (TIPS)
The U.S. government finances its debt by issuing Treasurys. When you buy Treasurys, you’re investing in bonds backed by the “full faith and credit of the U.S. government.” Unless the federal government defaults on its debt for the first time in history, investors get paid.
The price of that safety: pathetically low yields that often don’t keep up with inflation.
TIPS offer built-in inflation protection — as the name “Treasury Inflation Protected Securities” implies. Available in five-, 10- and 30-year increments, their principal is adjusted based on changes to the Consumer Price Index. The twice-a-year interest payments are adjusted accordingly, as well.
If your principal is $1,000 and the CPI showed inflation of 3%, your new principal is $1,030, and your interest payment is based on the adjusted amount.
On the flip side, if there’s deflation, your principal is adjusted downward.
4. Municipal Bonds
Municipal bonds, or “munis,” are bonds issued by a state or local government. They’re popular with retirees because the income they generate is tax-free at the federal level. Sometimes when you buy muni bonds in your state, the state doesn’t tax them either.
There are two basic types of munis: General obligation bonds, which are issued for general public works projects, and revenue bonds, which are backed by specific projects, like a hospital or toll road.
General obligation bonds have the lowest risk because the issuing government pledges to raise taxes if necessary to make sure bondholders get paid. With revenue bonds, bondholders get paid from the income generated by the project, so there’s a higher risk of default.
5. Investment-Grade Bonds
Bonds issued by corporations are inherently riskier than bonds issued by governments, because even a stable corporation is at higher risk of defaulting on its debt. But you can mitigate the risks by choosing investment-grade bonds, which are issued by corporations with good to excellent credit ratings.
Because investment-grade bonds are low risk, the yields are low compared to higher-risk “junk bonds.” That’s because corporations with low credit ratings have to pay investors more to compensate them for the extra risk.
6. Target-Date Funds
When you compare bonds vs. stocks, bonds are generally safer, while stocks offer more growth. That’s why as a general rule, your retirement portfolio starts out mostly invested in stocks and then gradually allocates more to bonds.
Target-date funds make that reallocation automatic. They’re commonly found in 401(k)s, IRAs and 529 plans. You choose the date that’s closest to the year you plan to retire or send your child to college. Then the fund gradually shifts more toward safer investments, like bonds and money market funds as that date gets nearer.
7. Total Market ETFs
While having a small percentage of your money in super low-risk investments like CDs,
money market funds and Treasurys is OK, there really is no avoiding the stock market if
you want your money to grow.
If you’re playing day trader, the stock market is a risky place. But when you’re committed to investing in stocks for the long haul, you’re way less exposed to risk. While downturns can cause you to lose money in the short term, the stock market historically ticks upward over time.
A total stock market exchange-traded fund will invest you in hundreds or thousands of companies. Usually, they reflect the makeup of a major stock index, like the Wilshire 5000. If the stock market is up 5%, you’d expect your investment to be up by roughly the same amount. Same goes for if the market drops 5%.
By investing in a huge range of companies, you get an instantly diversified portfolio, which is far less risky than picking your own stocks.
8. Dividend Stocks
If you opt to invest in individual companies, sticking with dividend-paying stock is a smart move. When a company’s board of directors votes to approve a dividend, they’re redistributing part of the profit back to investors.
Dividends are commonly offered by companies that are stable and have a track record of earning a profit. Younger companies are less likely to offer a dividend because they need to reinvest their profits. They have more growth potential, but they’re also a higher risk because they’re less-established.
The best part: Many companies allow shareholders to automatically reinvest their dividends, which means even more compound returns.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected]
You’ve got several factors to consider — ATM access, interest rates, monthly fees, minimum balances, mobile app reviews, and more.
Another factor to consider: bank promotions. These are cash bonuses you can earn when opening a new checking or savings account with a bank or credit union during the promotion window, meeting any specific criteria and keeping the account open at least long enough to earn the extra cash.
While a savings or checking bonus shouldn’t be your top reason to choose a bank, don’t rule it out entirely. After all, wouldn’t it be nice to fund your shiny new account with some extra cash?
Many banks offer such sign-up bonuses, but often, these bonuses aren’t advertised, meaning finding the best bank account bonuses can be tricky. That’s why we did some digging for you and found some hefty cash offers.
Best Bank Promotions of January 2021
We’ve researched the best cash bonuses available this month so you don’t have to. Below, you’ll find our favorite checking and savings account bonuses.
Keep an eye on what it takes to qualify, as well as any limitations. Direct deposit and minimum balances are commonly factors in securing these bonuses. Also pay attention to any monthly fees the account might carry; over time, these could weigh out the actual cash bonus. Otherwise, happy bank bonus shopping!
1. Aspiration Account: $100
Bonus amount: $100
How to get the bonus: To earn your $100, here’s all you need to do: Open your Aspiration account and deposit at least $10. Aspiration will send you a debit card associated with the account. Use the Aspiration debit card to make at least $1,000 of cumulative transactions within the first 60 days of opening your account. There’s no need to spend extra money — just use your card to buy groceries and pay your utilities.
Where to sign up: Enter your email address here, and link your bank account.
When you’ll get the bonus: Allow up to 120 calendar days from account opening to receive the bonus; you must have completed the requirements within the first 60 days.
The fine print: With Aspiration, your money is FDIC insured and under a military-grade encryption. The account offers up to 1.00% APY on savings and allows fee-free withdrawals at more than 55,000 ATMs. There are no hidden fees with Aspiration (monthly fees are on a “Pay What is Fair” policy, and that can be zero every month!), and you’ll earn cash back when you spend at socially conscious businesses.
No offer expiration.
2. TD Bank Beyond Checking Account: $300
Bonus amount: $300
How to get the bonus: Open a new TD Beyond Checking account. You must receive a total of $2,500 or more via direct deposit within 60 days of opening your new account.
Where to sign up: Visit this TD Checking page. Click the orange “open account” button, and follow the instructions to open a TD Beyond Checking account.
When you’ll get the bonus: The $300 bonus will be deposited into your account within 140 days of opening.
The fine print: While this bonus offer sounds too good to be true, it is definitely attainable. However, only open the account if you regularly get sizable monthly deposits or can maintain a healthy minimum balance. That’s because the account charges a monthly maintenance fee, but TD will waive the fee if you receive monthly direct deposits of $5,000, keep a minimum daily balance of $2,500 or maintain a combined balance of $25,000 across all your TD bank accounts.
TD fees — and the bank’s capacity for waiving them — extend to ATMs. You won’t face fees for making withdrawals at TD’s own ATMs, and it’ll reimburse all fees for withdrawing at non-TD ATMs as long as you keep your daily balance at $2,500 or more.
No offer expiration.
3. TD Bank Convenience Checking Account: $150
Bonus amount: $150
How to get the bonus: Open a new TD Convenience Checking account. You must receive a total of $500 or more via direct deposit within 60 days of opening your new account.
Where to sign up: Visit this TD Checking page. Click the orange “open account” button, and follow the instructions to open a TD Beyond Checking account.
When you’ll get the bonus: The $150 bonus will be deposited into your account within 140 days of opening.
The fine print: While this bonus offer sounds too good to be true, it is definitely attainable. Unlike the TD Bank Beyond Checking account, this checking account option is easier for financial beginners to manage. You only need to maintain a minimum balance of $100 to have the monthly maintenance fee waived. And if you’re between the age of 17 and 23, there are no minimum balance requirements and no monthly maintenance fee.
However, the Convenience Checking account does not earn interest; the Beyond Checking account does.
No offer expiration.
4. Bank of America Advantage Banking Account: $100
Bonus amount: $100
How to get the bonus: Open a new Bank of American Advantage Banking account online using the offer code DOC100CIS. You must then set up and receive two qualifying direct deposits, each totaling $250 or more, within 90 days of opening the new account. This offer is only available to new Bank of America personal checking account customers.
Where to sign up: Visit the offer page and use the offer code DOC100CIS when opening the account.
When you’ll get the bonus: Bank of America promises to “attempt” to deposit the bonus into the account within 60 days of satisfying all requirements. However, while the “attempt” language may seem suspect, we could not find traces of reviews citing unpaid bonuses.
The fine print: A qualifying direct deposit means the direct deposit must be regular monthly income, whether through salary, pension or Social Security benefits. Deposits through wire transfer, apps like Venmo or ATM transfers will not qualify.
Advantage Banking accounts come in three varieties: SafeBalance, Plus and Relationship. All three carry monthly maintenance fees that can be waived:
To waive the SafeBalance monthly maintenance fee of $4.95, enroll in Preferred Rewards.
To waive the Plus monthly maintenance fee of $12, receive a qualifying minimum direct deposit, maintain minimum daily balance requirements or enroll in Preferred Rewards.
To waive the Relationship monthly maintenance fee of $25, maintain the minimum combined balance in all linked accounts or enroll in Preferred Rewards.
Offer expires June 30, 2021.
Getty Images
5. Associated Bank Access Checking Account: Up to $500
Bonus amount: Up to $500
How to get the bonus: Open a new Associated Access Checking account with a minimum deposit of $25 and receive direct deposits totaling at least $500 within 90 days of opening your account. Bonus values will vary based on the sum of the average daily balance of all Associated Bank deposit accounts from days 61 to 90:
Average daily balances of $1,000 to $4,999.99 will earn a $200 bonus.
Average daily balances of $5,000 to $9,999.999 will earn a $300 bonus.
Average daily balances of $10,000 or more will earn a $500 bonus.
Where to sign up: Visit this Associated Bank account sign-up page and select the appropriate account.
When you’ll get the bonus: You will receive the bonus as a deposit to your account within 120 days of account opening.
The fine print: Must be a new Associated Access Checking customer. If easy access to a physical branch is important to you, note that the bank has locations in Illinois, Minnesota and Wisconsin, but members have free access to MoneyPass ATMs nationwide. Account must remain open for a minimum of 12 months; if you close it early, Associated Bank reserves the right to deduct the paid out bonus before account closure.
The account requires a minimum deposit of $25, charges $4 a month if you require paper statements and does not earn interest.
Offer expires May 31, 2021.
6. Associated Bank Balanced Checking Account: Up to $500
Bonus amount: Up to $500
How to get the bonus: Open a new Associated Balanced Checking account with a minimum deposit of $25 and receive direct deposits totaling at least $500 within 90 days of opening your account. Bonus values will vary based on the sum of the average daily balance of all Associated Bank deposit accounts from days 61 to 90:
Average daily balances of $1,000 to $4,999.99 will earn a $200 bonus.
Average daily balances of $5,000 to $9,999.999 will earn a $300 bonus.
Average daily balances of $10,000 or more will earn a $500 bonus.
Where to sign up: Visit this Associated Bank account sign-up page and select the appropriate account.
When you’ll get the bonus: You will receive the bonus as a deposit to your account within 120 days of account opening.
The fine print: Must be a new Associated Balanced Checking customer. If easy access to a physical branch is important to you, note that the bank has locations in Illinois, Minnesota and Wisconsin, but members have free access to MoneyPass ATMs nationwide. Account must remain open for a minimum of 12 months; if you close it early, Associated Bank reserves the right to deduct the paid out bonus before account closure.
The account requires a minimum deposit of $100 and does not earn interest.
Offer expires May 31, 2021.
7. Associated Bank Choice Checking Account: Up to $500
Bonus amount: Up to $500
How to get the bonus: Open a new Associated Choice Checking account with a minimum deposit of $25 and receive direct deposits totaling at least $500 within 90 days of opening your account. Bonus values will vary based on the sum of the average daily balance of all Associated Bank deposit accounts from days 61 to 90:
Average daily balances of $1,000 to $4,999.99 will earn a $200 bonus.
Average daily balances of $5,000 to $9,999.999 will earn a $300 bonus.
Average daily balances of $10,000 or more will earn a $500 bonus.
Where to sign up: Visit this Associated Bank account sign-up page and select the appropriate account.
When you’ll get the bonus: You will receive the bonus as a deposit to your account within 120 days of account opening.
The fine print: Must be a new Associated Choice Checking customer. If easy access to a physical branch is important to you, note that the bank has locations in Illinois, Minnesota and Wisconsin, but members have free access to MoneyPass ATMs nationwide. Account must remain open for a minimum of 12 months; if you close it early, Associated Bank reserves the right to deduct the paid out bonus before account closure.
The account requires a minimum deposit of $100. This account is the only Associated option that earns interest and offers complimentary checks.
Offer expires May 31, 2021.
8. Chase Total Checking Account: $200
Bonus amount: $200
How to get the bonus: Open a new Chase Total Checking account as a new Chase customer. Within 90 days of opening the account, have a qualifying direct deposit made into the account from your employer or the government.
Where to sign up: Visit this page on Chase’s website to sign up for the account and receive the $200 bonus. You can also open the account at a Chase location near you.
When you’ll get the bonus: Chase will deposit the $200 bonus into your account within 10 business days after you meet the criteria. This is the fastest turnaround of any banking bonus included on this list.
The fine print: Direct deposits from person-to-person payments do not qualify for the sake of this bonus. The Total Checking account carries a $12 monthly service fee, but you can have it waived if you receive direct deposits each month totaling $500 or more, keep a minimum balance in the account at the start of each day of at least $1,500, or keep a minimum balance across all your Chase accounts at the start of each day of at least $5,000.
If you close the account within six months of opening, Chase will deduct the bonus amount at closing.
Offer expires April 14, 2021.
9. Chase Savings Account: $150
Bonus amount: $150
How to get the bonus: Open a new Chase Savings account as a new Chase customer. Within 20 days of opening the account, deposit at least $10,000 in new money and then maintain a balance of at least $10,000 for 90 days.
Where to sign up: Visit this page on Chase’s website to sign up for the account and receive the $150 bonus. You can also open the account at a Chase location near you.
When you’ll get the bonus: Chase will deposit the $150 bonus into your account within 10 business days after you meet the criteria. This is the fastest turnaround of any banking bonus included on this list.
The fine print: The new money deposited into the account cannot be $10,000 that you already hold in another Chase account. The Chase Savings account carries a $5 monthly service fee, but you can have it waived if you keep a daily balance of at least $300 at the start of each day, have $25 or more in Autosave, have an associated Chase College Checking account for Overdraft Protection, have an account owner who is 18 or younger or link one of several Chase checking accounts.
If you close the account within six months of opening, Chase will deduct the bonus amount at closing.
Offer expires April 14, 2021.
Getty Images
10. Citibank Basic Banking Package: $200
Bonus amount: $200
How to get the bonus: Open a new checking account in the Basic Banking Package. Within 30 days, deposit $5,000 in funds that are new to Citibank. Maintain a minimum balance of $5,000 for 60 days in a row.
Where to sign up: Click “apply now” for the Basic Banking Package on this page to have the bonus applied.
When you’ll get the bonus: Citibank pays out the cash bonus into your account within 90 days of meeting the criteria.
The fine print: The deposited funds must be new to Citibank, meaning they can’t come from another Citibank account. Citibank charges a $12 monthly service fee, but you can have it waived in one of two ways:
Make a qualifying direct deposit and a qualifying bill payment during the statement period.
Maintained a combined average monthly balance of $1,500 in all linked accounts.
Citibank also waives the fee if you are 62 or older. Sometimes, it pays to be living in those golden years.
Rates and promotions may vary by location; verify your promotion details by entering your ZIP code on the site.
Offer expires January 5, 2021.
11. Citibank Account Package: $400
Bonus amount: $400
How to get the bonus: Open a new checking account in the Account Package. Within 30 days, deposit $15,000 in funds that are new to Citibank. Maintain a minimum balance of $15,000 for 60 days in a row.
Where to sign up: Click “apply now” for the Account Package on this page to have the bonus applied.
When you’ll get the bonus: Citibank pays out the cash bonus into your account within 90 days of meeting the criteria.
The fine print: The deposited funds must be new to Citibank, meaning they can’t come from another Citibank account. A savings account is required with this package. Citibank charges a $25 monthly service fee, but you can have it waived if you maintain a combined monthly average of $10,000 or more in all linked accounts.
Rates and promotions may vary by location; verify your promotion details by entering your ZIP code on the site.
Offer expires January 5, 2021.
12. Citibank Priority Account Package: $700
Bonus amount: $700
How to get the bonus: Open a new checking account in the Priority Account Package. Within 30 days, deposit $50,000 in funds that are new to Citibank. Maintain a minimum balance of $50,000 for 60 days in a row.
Where to sign up: Click “apply now” for the Account Package on this page to have the bonus applied.
When you’ll get the bonus: Citibank pays out the cash bonus into your account within 90 days of meeting the criteria.
The fine print: The deposited funds must be new to Citibank, meaning they can’t come from another Citibank account. A savings account is required with this package. Citibank charges a $30 monthly service fee, but you can have it waived if you maintain a combined monthly average of $50,000 or more in all linked accounts.
Rates and promotions may vary by location; verify your promotion details by entering your ZIP code on the site.
Offer expires January 5, 2021.
13. HSBC Premier Checking Account: Up to $600
Bonus amount: 3% cash bonus up to $600
How to get the bonus: Open a new HSBC Premier Checking account, then set up qualifying direct deposits into the account once per calendar month for six consecutive months. You will then receive a 3% cash bonus based on the amount of your qualifying direct deposits, with a max of $100 a month for six months.
Where to sign up: Use this offer page to sign up for the offer. Click “apply now” on the HSBC Premier Checking account.
When you’ll get the bonus: You will receive your 3% cash bonus in your account approximately eight weeks after completing each month’s qualifying activities.
The fine print: To get the bonus, you cannot have had an HSBC account from September 30, 2017 through September 30, 2020. You must also have been a U.S. resident for at least two years and must be 18 or older.
HSBC applies a monthly maintenance fee of $50 unless you maintain a balance of $75,000 across your accounts, receive monthly recurring deposits of $5,000 or more or have an HSBC US residential loan with an original loan amount of at least $500,000.
Offer expires January 7, 2021.
14. HSBC Advance Checking Account: Up to $240
Bonus amount: 3% cash bonus up to $240
How to get the bonus: Open a new HSBC Advance Checking account, then set up qualifying direct deposits into the account once per calendar months for six consecutive months. You will then receive a 3% cash bonus based on the amount of your qualifying direct deposits, with a max of $40 a month for six months.
Where to sign up: Use this offer page to sign up for the offer. Click “apply now” on the HSBC Advance Checking account.
When you’ll get the bonus: You will receive your 3% cash bonus in your account approximately eight weeks after completing each month’s qualifying activities.
The fine print: To get the bonus, you cannot have had an HSBC account from September 30, 2017 through September 30, 2020. You must also have been a U.S. resident for at least two years and must be 18 or older.
HSBC applies a monthly maintenance fee of $50 unless you maintain a balance of $75,000 across your accounts, receive monthly recurring deposits of $5,000 or more or have an HSBC US residential loan with an original loan amount of at least $500,000.
Offer expires January 7, 2021.
Getty Images
How to Search for the Best Bank Offers and Promotions on Your Own
In the spirit of not listing approximately 193 bank promotions, we kept this list short and sweet — only highlighting the best bank promotions for checking and savings accounts.
But maybe you’re interested in banking with your local credit union, opening up a small business checking account or finding the perfect investment account? There are often bonus offers attached to these account openings, too.
The banks don’t always make finding these promotions easy, so here are a few tips to help you get your hands on that cash bonus.
Check the bank’s website first. Sometimes it’ll advertise its promotions right there. This is rare, but it’s worth a quick check — it could save you a ton of time.
If you don’t have any luck, reach out to the bank’s customer service team through phone, email or chat. Let them know you’re shopping for a new account, and you’d like to know if it’s running any promotions. More often than not, the nice representative will send you a special link.
If this doesn’t work, turn to your trusty friend Google. Look for the best bank promotions. Because you’ll likely dig up some offers from third-party sites, you’ll want to take a few minutes to make sure the offer:
Hasn’t expired.
Is legitimate. Make sure the bank is FDIC-insured and has a positive Better Business Bureau rating. You can even read some online reviews.
Doesn’t require outrageous qualifying activities. For example, it might not be realistic for you to maintain an average daily balance of $50,000 and carry out 60 qualifying debit card purchases before the end of your first 30-day statement cycle.
You can also reach out to your family, friends and social network to crowdsource bank recommendations. Sometimes banks have impressive referral programs, so both you and your friend could benefit from you signing up.
Overall, be smart. Don’t let that promise of an account bonus blind you. Also, read the fine print so you don’t get stuck paying high monthly fees, interest rates or closing penalties.
Will Opening a Bank Account Hurt Your Credit Score?
If you’re worried that opening a new bank account or closing an old one will hurt your credit score, don’t be. Your bank accounts are not included in your credit report and therefore have no effect on your score, unless you have an outstanding negative balance that the bank turns over to a collection agency.
Sometimes when you go to open a new bank account, banks will do a soft credit check. However, that won’t affect your score.
Now, go enjoy your fresh new bank account and that nice cash bonus you’re about to pocket. Add it to your savings account, put it toward student loan payments or, heck, treat yourself!
Editorial Disclosure: This content is not provided by the bank advertiser. Opinions expressed here are the author’s alone, not those of the bank advertiser. This site may be compensated through the bank advertiser Affiliate Program.
Setting up a budget is challenging. Doing it forces you to face your spending habits and then work to change them.
But when you decide to make a budget, it means you’re serious about your money. Maybe you even have some financial goals in mind.
The end result will bring you peace of mind. But if you’re creating a budget for the first time, remember that budgets will vary by individual and family. It’s important to set up a budget that’s a fit for YOU.
Budgeting for Beginners in 5 Painless Steps
Follow these basic steps and tailor them to your needs to create a monthly budget that will set you up for financial success.
Step 1: Set a Financial Goal
First thing’s first: Why do you want a budget?
Your reason will be your anchor and incentive as you create a budget, and it will help you stick to it.
Set a short-term or long-term goal. It can be to pay off debts like student loans, credit cards or a mortgage, or to save for retirement, an emergency fund, a new car, a home down payment or a vacation.
For example, creating a budget is a must for many people trying to buy their first home. But it shouldn’t stop there. Once you’ve bought a home, keep sticking to a budget in order to pay off debt and give yourself some wiggle room for unexpected expenses.
Once one goal is complete, you can move on to another and personalize your budget to fit whatever your needs are.
Step 2: Log Your Income, Expenses and Savings
You’ll want to use a Microsoft Excel spreadsheet or another budget template to track all of your monthly expenses and spending. List out each expense line by line. This list is the foundation for your monthly budget.
Tally Your Monthly Income
Review your pay stubs and determine how much money you and anyone else in your household take home every month. Include any passive income, rental income, child support payments or side gigs.
If your income varies, estimate as best as you can, or use the average of your income for the past three months.
Make a List of Your Mandatory Monthly Expenses
Start with:
Rent or mortgage payment.
Living expenses like utilities (electric, gas and water bills), internet and phone.
Car payment and transportation costs.
Insurance (car, life, health).
Child care.
Groceries.
Debt repayments for things like credit cards, student loans, medical debt, etc.
Anything that will result in a late fee for not paying goes in this category.
List Non-Essential Monthly and Irregular Expenses
Non-essential expenses include entertainment, coffee, subscription and streaming services, memberships, cable TV, gifts, dining out and miscellaneous items.
Don’t forget to account for expenses you don’t incur every month, such as annual fees, taxes, car registration, oil changes and one-time charges. Add them to the month in which they usually occur OR tally up all of your irregular expenses for the year and divide by 12 so you can work them into your monthly budget.
Pro Tip
Review all of your bank account statements for the past 12 months to make sure you don’t miss periodic expenses like quarterly insurance premiums.
Getty Images
Don’t Forget Your Savings
Be sure to include a line item for savings in your monthly budget. Use it for those short- or long-term savings goals, building up an emergency fund or investments.
Figure out how much you can afford — no matter how big or small. If you get direct deposit, saving can be simplified with an automated paycheck deduction. Something as little as $10 a week adds up to over $500 in a year.
Step 3: Adjust Your Expenses to Match Your Income
Now, what does your monthly budget look like so far?
Are you living within your income, or spending more money than you make? Either way, it’s time to make some adjustments to meet your goals.
How to Cut Your Expenses
If you are overspending each month, don’t panic. This is a great opportunity to evaluate areas to save money now that you have itemized your spending. Truthfully, this is the exact reason you created a budget!
Here are some ways you can save money each month:
Cut optional outings like happy hours and eating out. Even cutting a $4 daily purchase on weekdays will add up to over $1,000 a year.
Consider pulling the plug on cable TV or a subscription service. The average cost of cable is $1,284 a year, so if you cut the cord and switch to a streaming service, you could save at least $50 a month.
Fine-tune your grocery bill and practice meal prepping. You’ll save money by planning and prepping recipes for the week that use many of the same ingredients. Use the circulars to see what’s on sale, and plan your meals around those sales.
Make homemade gifts for family and friends. Special occasions and holidays happen constantly and can get expensive. Honing in on thoughtful and homemade gifts like framed pictures, magnets and ornaments costs more time and less money.
Consolidate credit cards or transfer high-interest balances. You can consolidate multiple credit card payments into one and lower the amount of interest you’re paying every month by applying for a debt consolidation loan or by taking advantage of a 0% balance-transfer credit card offer. The sooner you pay off that principal balance, the sooner you’ll be out of debt.
Refinance loans. Refinancing your mortgage, student loan or car loan can lower your interest rates and cut your monthly payments. You could save significantly if you’ve improved your credit since you got the original loan.
Get a new quote for car insurance to lower monthly payments. Use a free online service to shop around for new quotes based on your needs. A $20 savings every month is $20 that can go toward savings or debt repayments.
Start small and see how big of a wave it makes.
Oh, and don’t forget to remind yourself of your financial goal when you’re craving Starbucks at 3 p.m. But remember that it’s OK to treat yourself — occasionally.
Lindsey Cox and Jonathan Tuttle dig into income- and expense-related paperwork as they prepare to file their taxes at their home in Temple Terrace, Fla. Tina Russell/The Penny Hoarder
What to Do With Your Extra Cash
If you have money left over after paying for your monthly expenses, prioritize building an emergency fund if you don’t have one.
Having an emergency fund is often what makes it possible to stick to a budget. Because when an unexpected expense crops up, like a broken appliance or a big car repair, you won’t have to borrow money to cover it.
When you do dip into that emergency fund, immediately start building it up again.
Otherwise, you can use any extra money outside your expenses to reach your financial goals.
Here are four questions to ask yourself before dipping into your emergency fund..
Step 4: Choose a Budgeting Method
You have your income, expenses and spending spelled out in a monthly budget, but how do you act on it? Trying out a budgeting method helps manage your money and accommodates your lifestyle.
Living on a budget doesn’t mean you can’t have fun or splurges, and fortunately many budgeting methods account for those things. Here are a few to consider:
The Envelope System is a cash-based budgeting system that works well for overspenders. It curbs excess spending on debit and credit cards because you’re forced to withdraw cash and place it into pre-labeled envelopes for your variable expenses (like groceries and clothing) instead of pulling out that plastic.
The 50/20/30 Method is for those with more financial flexibility and who can pay all their bills with 50% of their income. You apply 50% of your income to living expenses, 20% toward savings and/or debt reduction, and 30% to personal spending (vacations, coffee, entertainment). This way, you can have fun and save at the same time. Because your basic needs can only account for 50% of your income, it’s typically not a good fit for those living paycheck to paycheck.
The 60/20/20 Budget uses the same concept as the 50/20/30, except you apply 60% of your income to living expenses, 20% toward savings and/or debt reduction, and 20% to personal spending. It’s a good fit for fans of the 50/20/30 Method who need to devote more of their incomes to living costs.
The Zero-Based Budget makes you account for all of your income. You budget for your expenses and bills, and then assign any extra money toward your goals. The strict system is good for people trying to pay off debt as fast as possible. It’s also beneficial for those living to paycheck to paycheck.
Tina Russell/The Penny Hoarder
Budgeting Apps
Another money management option is to use a budgeting app. Apps can help you organize and access your personal finances on the go and can alert you of finance charges, late fees and bill payment due dates. Many also offer free credit score monitoring.
Step 5: Follow Through
Budgeting becomes super easy once you get in the groove, but you can’t set it and forget it. You should review your budget monthly to monitor your expenses and spending and adjust accordingly. Review checking and savings account statements for any irregularities even if you set bills to autopay.
Even if your income increases, try to prioritize saving the extra money. That will help you avoid lifestyle inflation, which happens when your spending increases as your income rises.
The thrill of being debt-free or finally having enough money to travel might even inspire you to seek out other financial opportunities or advice. For example, if you’re looking for professional help, set up a consultation with a certified financial planner who can assist you with long-term goals like retirement and savings plans.
Stephanie Bolling is a former staff writer at The Penny Hoarder.
Take a moment. Think about being your best self — living your best life.
You’re probably asking yourself, “How much should I save?”
Here are five different budgeting methods. We can’t tell you which one to choose. Be honest with yourself, and choose the one you think is most likely to work for you. This is how to save money on a tight budget.
To help you save money and navigate this complicated industry, modern companies are updating the old model:
Table of Contents
You can also sell nearly anything through the Letgo app. Just snap a photo of your item and set up a listing in about 30 seconds. If you have more free time, try selling items on Craigslist or eBay.
Here Are Our Best Tips to Save Money
This one was popularized by U.S. Sen. Elizabeth Warren, a bankruptcy expert, and her business-executive daughter Amelia Warren Tyagi. *https://www.fdic.gov/regulations/resources/rates/
Step 1: Develop Savings Goals and Strategies
Chris Zuppa/The Penny Hoarder
Your priciest purchases — like appliances and furniture — are a natural place to look for savings. Try repairing your appliances instead of replacing them. And here’s a good list of other tricks for saving on furniture and appliances. Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He’s slowly getting better about saving money.
Think Long Term and Short Term
Here are the blunt facts about how to get lower car insurance premiums: Have fewer accidents, get fewer traffic tickets and boost your credit score.
Short-term: Save for a real vacation or nice holiday gifts. But first, save enough to have a decent emergency fund — three to six months’ worth of living expenses, in case you run into an unexpected car-repair bill or lose your job, for example.
Long-term: This involves big-picture thinking. Here, you’re saving money for things like your children’s college fund or for your retirement plan.
Analyze Your Income
The best ways to save include automation. You’ll save time, and time is money. Here are a few money-management steps you can take today to ensure you won’t have to think about money for more than a few minutes every month.
Get the Penny Hoarder Daily
An easy way to automate this process is to use Trim, a little bot that’ll keep track of all your transactions. Source: thepennyhoarder.com
Check in on Your Credit
Groceries are a huge part of everyone’s budget, so they’re a big target for savings. Next time you’re putting together your shopping list, make sure to check out our favorite tricks to save money at the grocery store:
The FDIC reports that the average savings account pays a paltry .08% APY*, but when you open an online checking and savings account with Varo, it will pay you more than 20 times that amount on your savings account.
Your first move is to set specific savings goals for yourself — emphasis on specific. Naming your goals will make them more real to you. It’ll help you resist the temptation to spend your money on other stuff.
Step 2: Pick Budgeting and Debt Repayment Methods
Tina Russell/The Penny Hoarder
Life insurance pays your dependents a set amount of money if you die. Whether to buy it is a judgment call.
We know opening a new bank account isn’t exactly everyone’s idea of fun, but Varo makes it easy. You can open an account with just a penny, and more than 750,000 people have already signed up.
You don’t have to be Warren Buffett to be an investor. You don’t even have to follow the stock market, read The Wall Street Journal or watch CNBC.
The 50/30/20 Rule
Related Posts
How much can you realistically save for these goals, now that you’re making them a priority?
That’s right. We’re deep into the 21st century, here, so make technology do the work for you.
Envelope Budgeting
You won’t get rich taking surveys, but if you’re just vegging out on the couch, why not click a couple buttons and earn a few bucks? We’ve tried a lot of paid survey sites, and two of the best we’ve found are My Points and InboxDollars.
How can you increase your income? It’s easier to save money if you’re bringing in more money to begin with.
If you’re going to stay in, cut the cord. More and more people are doing this, because their cable bill has gotten so expensive.
Zero-Based Budget
Do your own credit check. Keeping tabs on your credit score and your credit reports can help guide you to a financially healthier life — especially if you use a free credit-monitoring service like Credit Sesame. It gives you personalized suggestions for improving your credit.
Oh, and there are no monthly fees.
Debt Avalanche
Your home is your castle. But castles are so, like, expensive. Fortunately, there are lots of ways to save money around the house. Here’s how: Go to your bank’s online bill-pay feature. Enter all the companies that bill you, and the account numbers for each. Arrange to receive e-bills from whichever billers will do that.
Debt Snowball
Maybe it’s time to try another financial institution. We’ve found some great online bank accounts to help you avoid fees and get features you won’t find with the brick-and-mortar banks.
These days, credit card interest rates often climb north of 20%. How can you avoid paying all that interest? Your best bet is to cut back on your expenses and pay off your balance as soon as you realistically can.
Step 3: Choose a Financial Institution and Accounts
Tina Russell/The Penny Hoarder
Good for: People who worry they won’t have a life if they’re on a budget. Here’s our complete guide to 50/30/20 budgeting.
What exactly do you want to save money for? How much will you need to save? And what do you need to save for first? Think short- and long-term:
What to Look for in a Bank Account
Did you know the biggest U.S. banks are collecting more than billion a year in overdraft and ATM fees?
Ready to stop worrying about money?
Entertainment can cost an arm and a leg. But hey, we have to live, right? So do it for free! Next time you’re planning a night out, take advantage of one of these free date nights or group outings.
Connect your checking account, credit card and savings account for a big-picture look at your spending habits. Then, take a closer look by checking out each of your transactions. Set alerts that’ll let you know when bills are due, when you’ve hit a spending cap or when you’ve (hopefully not) overdrafted. This will help you stick with your savings plan.
Let’s face it: Health insurance can be confusing and intimidating.
Here’s how to find affordable insurance:
You can also have your bank send digital payments to individuals (like a landlord).
Split your income into three spending categories: 50% goes to essential bills and monthly expenses, 20% toward financial goals and 30% to personal spending (all the stuff you like to spend money on but don’t really need). Put the money earmarked for your financial goals into a separate savings account.
Unfortunately, Americans are bad at saving money, and we’re getting worse. Thanks to rising costs, stagnant salaries and student loan debt, we’re saving less than ever.
Pay Less in Credit Card Interest
You’ll probably be asked to choose between two options: term or universal life insurance. If you’re like most of us, you’ll choose term — the simplest, cheapest and most popular kind of life insurance policy.
Most people don’t give this a second thought. They figure it’s too inconvenient to switch. But it’s worth shopping around for a better option, because where you bank can make a real difference in how much you save. Good for: People who need a simple, straightforward method that accounts for every dollar. Here’s our guide to the zero-based budget.
Start by using the right credit card for you, based on your situation and needs. Would you prefer a card that gives you cash back or travel incentives, a balance-transfer card, or a card that’ll help you build credit?
AmOneallows you to compare rates side-by-side from multiple lenders who are competing against each other for your business. It’s best for borrowers who have good credit scores and just want to consolidate their debt.
Fiona is also a marketplace but allows you to borrow more money and borrow it for a longer period of time — if that’s what you want to do.
Upstart tends to be helpful for recent grads, who have a young credit history and a mound of student debt. It can help you find a loan without relying on only your conventional credit score.
Step 4: Automate Your Finances
Chris Zuppa/The Penny Hoarder.
You might be thinking, I already have a bank. And of course you do. If you’re like most of us, you’ve had the same bank for years.
Are you ready to actually start saving money? What you’re reading is a step-by-step guide on how to do it — how to come up with savings strategies, choose a budgeting method, pick the right financial institution, automate your finances and live a budget-conscious lifestyle.
Automate Bill Pay
Does your checking account pay you interest? What are the fees like? What other perks does it offer?
Good for: People who know they need help with self-control. If there’s nothing left in one envelope toward the end of the month, there’s no more money to spend on that category, period.
Digit is an automated savings platform that calculates how much money you can save. Here’s our review of Digit.
Stash lets you start investing with as little as $5 and for just a $1 monthly fee for balances under $5,000. Bonus: Penny Hoarders get $5 just for signing up!
Acorns connects to your checking account, credit and debit cards to save your digital change. It automatically rounds up purchases with your connected cards and invests the digital change into your chosen portfolio. Bonus: Penny Hoarders get $5 just for signing up! Read our full review of Acorns here.
Blooom is a company that offers a free “health check-up” for your 401(k). Then, for only $10 a month (Penny Hoarders get the first month free!), it’ll optimize and manage your retirement savings for you. See how Blooom helped one Penny Hoarder make the most of her 401(k).
Automate Budgeting
Good for: People with a lot of credit card debt. Credit cards generally charge you higher interest than other lenders do. Learn more about the debt avalanche method here.
You just have to be smart and strategic. Here are some of our best tips to help you spend less:
If you’re buying insurance for yourself, start with the federal health insurance marketplace at Healthcare.gov to see whether you qualify for any discounts or assistance.
Finding affordable health care coverage is a huge challenge for freelancers. Here’s how to get covered if you’re self-employed.
Not loving the supermarket? Nearly 70% of us say we spend too much on take-out or going out to eat. Here’s how to save money at restaurants, too.
Step 5: Establish a Budget-Conscious Lifestyle
Carmen Mandato/ The Penny Hoarder
That doesn’t mean you have to live like a monk. Nor do you have to survive on ramen noodles and the dollar menu, wear scuffed shoes and patchy clothes, or cut your own hair with hedge clippers.
So-called envelope budgeting is traditionally a cash-only budget. Every month, you use cash for different categories of spending, and you keep that cash for each category in separate envelopes — labeled for groceries, housing, phone, etc.
Most bills are paid online now, reports the Credit Union Times. But you can take it a step further. Set it up so you’ll receive and pay all of your bills online through your bank. That simplifies things so you’ll never miss a payment.
Save Money Around the House
Mint lets you see all your accounts, cards, bills and investments in one place.
Charlie is a money-saving penguin who lives in your SMS text messages or Facebook Messenger (your choice, though Charlie is more fun and reliable on Messenger). He helps you save money through things like making sure you’re getting the best deals around (ahem, overpaying a month on that cell phone bill?).
Here are a couple of simple ways to make extra cash at home:
Find Free Entertainment
This way, you can put savings right into your budget. It’s never an afterthought.
Sell your old stuff! Use the Decluttr app to get paid for your old DVDs, Blu-Rays, CDs, video games, gaming consoles and phones.
Automotive experts also gave us the following tips:
Money management guru Dave Ramsey champions the debt snowball method of debt repayment. Pay off your debts with the smallest balances first. This allows you to eliminate debts from your list faster, which can motivate you to keep going.
Cut Your Food Budget
You can take advantage of these apps offering easy, automatic ways to start investing — the “set it and forget it” method. They’re useful for tricking your brain into saving more. You’ll do it without even realizing you’re doing it. The cost of cooling, heating and lighting your home is massive. Try installing thermal curtains and a programmable thermostat. Or check out these creative, energy-saving ways to slash your utility bills.
Find out If You’re Wasting Money on Insurance
Also consider paying off your high-interest debt with a low-interest personal loan. It’s easier than you might think. Go window-shopping at an online marketplace for personal loans. Here are some we’ve test-driven for you:
Reality check: To accomplish any of those things, you’re going to need to know how to save money.
For Your Car: Auto Insurance
Prefer plastic? Here’s our review of Mvelopes, an app that lets you digitize this method.
This debt-repayment method helps you budget when you have debt. Pay off your debts with the highest interest rates first — most likely your credit cards. Doing that can save you a lot of money over time.
Participate in your insurer’s safe-driving program.
Shop around for better rates. One easy way is The Zebra, a car insurance search engine that compares your options from more than 200 providers in less than 60 seconds. Here’s how one guy is saving $360 this year on car insurance because of The Zebra.
For Yourself: Health Insurance
Good for: People who owe a lot of different kinds of debts — credit cards, student loans, etc. — and who need motivation. Here’s how to use the debt snowball method to eliminate debt.
Pour yourself a cup of coffee and buckle up. It’s time to get serious about this. Privacy Policy
For Your Family: Life Insurance
Buying insurance can be confusing and overwhelming, because there are so many options.
Here’s how you draw up this budget: Your income minus your expenses (including savings) equals zero. This way, you have to justify every expense. MoneyLion offers rewards to help you develop healthy financial habits and will literally pay you for logging onto the app. You can earn points in the rewards program by paying bills on time, connecting your bank account or downloading the mobile app. To free up more money for savings, try to spend less paying interest on your debts — especially if you have high-interest credit card debt.
Policygenius is an online-only platform that offers instant quotes from top carriers to help you make a quicker decision. Once you choose a life insurance company, you can apply right online, and a Policygenius rep will give you a quick call to ask a few follow-up questions.
Haven Life can insure you quickly based just on the health information you provide online.
Ethos can get you term life insurance in less than 10 minutes — with no medical exam — for coverage up to $1 million. Ethos offers a digital application, and customer service is available if you have questions.
Step 6: Make More Money
Tina Russell/The Penny Hoarder
Life insurance is considered more important if you’re married or have children. You might also want a basic policy that would pay off your funeral, mortgage or other debt.
Here’s the harsh reality: To save more money, you’ll need to spend less money. (Or make more money, but we’ll get to that next.)
Share Your Opinion
Whatever you need done financially, there’s an app for that. We’ve put several to the test.
Clear Your Closets
What do you really want to do with your life? Raise a happy family? Travel the world? Buy a nice house? Start your own business?
Here’s one example: There’s a mobile baking app called Varo Money.
Write down your income and expenses — all of your expenses, from utility bills to your Netflix subscription. There are probably more ways to save money than you realize. Don’t forget your student loans or credit card debt. Make sure you know what you’re spending in every budget category. Pay special attention to what you’re spending on non-essentials, such as eating out.
<!–
–> <!–
–>
You also should reconsider that gym membership if you’re not really using it. Medean for iOS ranks your finances based on how they stack up to those of people of similar age, income, location and gender. It calls itself a “health index for your finances,” and helps assess your situation and find ways to save money. For our best ideas to boost your bottom line, check out the following:
If you’re thinking of switching to an online streaming service and you’re wondering which would be best, we’ve got you covered with our comparison of Netflix, Prime Video and Hulu. We compared costs, type of content, number of available titles and more.
