Some 63% of Americans hope to save more this yearaccording to a recent survey from Bank of America.
Although rampant inflation from 2022 appears to be slowing, consumers are still facing high prices for everything from rent to eggs. As a result, 77% of those who set financial goals said inflation could affect their ability to achieve their goals.
Don’t worry, our team of financial experts will let you know. To increase your savings rate, simply cut back on all the small, unrelated expenses in your daily life, such as lattes and avocado toast.
That was Rachael Camp’s strategy when she first moved to Chicago and had to pay so much rent that it put a strain on the rest of her budget.
“I’m trying to make coffee at home,” she said. “I’ve prepared all the food at home. It’s exhausting trying to follow these routines every day.” “I always go over my budget.”
Today, Camp is a certified financial planner and owner of Camp Wealth, where her advice to clients is a little different.
“Buy latte. Splurge on avocados. Keep renting,” she wrote in a recent tweet. “In 2023, our focus is on needle manufacturing companies that: 1) Reduce fixed costs 2) Increase income 3) Invest in differentiation.
This is why she says you’re better off focusing on the big, one-time financial moves instead of focusing on the day-to-day business.
Reduce your fixed costs into big chunks
By the time Camp’s lease on her Chicago apartment ended, she was already making more money, which made upgrading to nicer apartments very appealing. “What a lot of people do is they keep walking up to slightly nicer apartments,” she said. “A lot of my colleagues have started to have their own apartments.”
The camp chose to move somewhere cheaper and live with roommates. For her, it was a simple calculation. “If I didn’t buy a latte a day, I would save $2,000 a year,” she says. “If I could buy a $2,000 apartment alone, but split it with a roommate and pay $1,000 less, that’s $12,000 a year. That’s where the big savings come in. that can really happen.”
If I could buy a $2,000 apartment alone, but split it with a roommate and pay $1,000 less, that’s $12,000 a year.
Camp Rachael
certified financial planner
The same logic applies to large purchases like homes and cars. For example, if it’s likely you’ll move out within the next five years, buying a home comes with huge upfront costs that you could have a hard time recoupling, Camp says.
“It might make sense in certain situations, but for a lot of people, it’s not an investment,” she said. “That’s not all it breaks.”
As for cutting down on commuting costs, consider whether you need a car or not if you live in a place with a lot of public transport.
If a car is absolutely essential, even “buying a car a few years old rather than a brand new one” could be a necessary move, Camp said.
Increase your income to give yourself breathing space
Increasing your income is easier said than done. But one way to get started is to pick one side hustleand there’s no shortage of them out there, even if you’re a artistone Introvert or someone love working from home.
If not, you’ll have to find a way to increase your 9th to 5th day earnings. To get there, “know how to really work negotiate your salary and knowing your worth is really important,” says Camp.
Camp’s #1 question for clients looking to increase their income: “How often do you interview elsewhere?”
In doing so, you can see if you’re being paid fairly at your current gig, or if you can make more money elsewhere. The typical American changed employers from April 2021 to March 2022 there was a 9.7% increase in inflation-adjusted “real” wagesAccording to Pew Research.
If you don’t want to leave, “you can take that offer, bring it to your current employer and say, ‘Hey, I think I’m worth a little more,'” Camp said.
Difference investment
If you’ve managed to spend less money or earn more, congratulations. Now is the time to set aside the surplus for your financial goals, such as paying down debt, building an emergency fund, and investing for retirement.
With your money being pulled in so many different directions, investing in yourself can feel as tedious as controlling your daily budget. That’s why Camp recommends putting your investments on autopilot whenever you can.
“[Workplace retirement plans such as] 401(k) or the 403(b) account is the master of automation. You never see that money reach your checking account because it gets sent to your investment account before you see it. It’s a great first step to take,” Camp said.
You can also set up automatic transfers from your bank account, both in terms of your financial goals and cost of living.
“When my money arrives in my checking account, it is immediately sent to do its job before I can spend it,” says Camp. “It goes into a Roth IRA, it can go into a taxable brokerage account, it can go into a holiday savings account.”
Once you’ve paid your bills, too, any money you have left can be spent “without fault,” she said.
Register now: Smarter about your money and career with our weekly newsletter
Do not miss: Economists say there’s a 61% chance of a recession this year—what it means for your money
