savings

10 surefire savings tips for 2016

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Be a rebel and save money on a regular basis. Start or boost  your emergency   savings fund. Only about 1-in-4 Americans has an adequately funded emergency savings  account.

Now, where to put that money?

Put it in an online savings account. These are where you're going to earn the competitive yields and still have the protection of the Federal Deposit Insurance Corp. (FDIC) while being able to get to the money whenever it's needed.

Americans continue to place an increased emphasis on saving, with nearly 1 in 5 Americans citing this as their top financial priority. What better time to give yourself a fresh start than the beginning of a new year?

Want to boost your savings in the new year? Here are 10 savings tips to help you reach your goals in 2016.

For the best savings accounts, go to Bankrate.com.

Wooden block etched with the word 'SAVE' © Gajus/Shutterstock.com

1. Start, or boost, your emergency savings

Less than 25% of Americans have an adequate emergency savings cushion, and an alarming 29% have no emergency savings at all, so the majority of people need to heed this tip. Since the biggest barrier to saving is not being in the habit of saving, the best way to get in the habit is to pay yourself first.

Have money directly deposited from your paycheck or even your checking account into a dedicated savings account. This can be done concurrently with other goals such as paying down debt or saving for retirement, not instead of those goals. You won't miss what you don't see, and putting your savings on autopilot is a great way to reinforce the savings habit when unplanned expenses inevitably come along and chew a hole in what you've saved.

You're only 1 paycheck away from beginning to replenish your savings balance.

2. Get an online savings account

There are 3 requirements when looking for a place to put your rainy-day fund:

  • It must be liquid, meaning you can get to the money whenever you need it.
  • It must be free of investment risk.
  • You must earn a return that preserves your buying power against the erosive effect of inflation.

Even hovering just north of 1%, the top-yielding savings accounts and money market accounts backed by the Federal Deposit Insurance Corp. meet the first 2 requirements. And while returns still trail the rate of inflation, these top-paying financial institutions will be quick to reflect Federal Reserve interest rate hikes, giving you the best shot of keeping up with inflation as interest rates rise.

Best of all, these accounts can be opened with little or nothing in the way of a minimum deposit and are available to consumers anywhere in the U.S. Check Bankrate.com's search engine for the highest-yielding, government-insured savings accounts available nationwide.

3. Find a free checking account

Having the wrong checking account can take hundreds of hard-earned dollars out of your pocket every year. The average interest-bearing checking account charges a monthly service fee of $15.24 and requires maintaining a balance of more than $6,300 at a near-zero rate of interest to avoid fees, according to the 2015 Bankrate Checking survey.

Instead, look for an account that charges no monthly service fees or per-transaction fees and doesn't require a minimum balance. Bankrate.com found that while just 38% of large banks and thrifts in markets around the country offer a no-interest, free checking account, 72% of the nation's largest credit unions still do, according to Bankrate's 2015 Credit Union Checking Survey.

Even if your bank has eliminated free checking accounts, that doesn't mean you're stuck paying the fee.

The majority of banks and credit unions will waive the fee for customers with multiple accounts or even something as simple as signing up for direct deposit. Check out Bankrate.com's tips for avoiding fees and use the search engine to find a free checking account that meets your needs.

4. Track your monthly spending

Some 18% of Americans don't keep a budget, according to Bankrate.com's Money Pulse poll released in January. Whether you call it a budget or a spending plan, getting a handle on your spending accomplishes 2 things:

  • It helps you determine where you can cut back.
  • It helps maximize your savings efforts.

Begin by tracking your spending for a 2-month period. Then, take this information and build a realistic monthly budget.

Each month, track all of your expenses -- everything from your $1 tip to the grocery store bag boy to the monthly mortgage payment. At month's end, tally your spending against the budget, and see where you did well and where you didn't.

If you spent less than planned, move the excess into your online savings account or use it to pay down debt.

5. Pay down high-interest-rate credit card debt

For many households, the best return on your money is to pay down credit card debt. Whether carrying balances at 12% or 22%, credit card debt is typically the most costly debt that households have.

Plowing excess cash into repayment of credit card debt is a double-digit, risk-free return because it reduces the outstanding balance and the resulting interest charges.

Furthermore, this is a sound move now before credit card rates start moving higher. Consumers with strong credit profiles can still find interest rates in the single digits as well as 0% balance-transfer offers, with some still lasting as long as 18 months.

To shop for lower-rate card offers, visit the credit cards channel at Bankrate.com.

When prioritizing your debt repayment, start with the card with the highest interest rate and focus on paying off the balances in descending order.

Use Bankrate.com's debt paydown calculator to develop a custom, month-by-month plan on repaying your debt.

6. Begin, or increase, contributions to a retirement plan

The burden of supporting ourselves in retirement is increasingly on our own shoulders. The first introduction to retirement savings often comes through a workplace retirement plan, such as a 401(k).

Contributions reduce your taxable income now, and your investment goes to work immediately and grows without the headwind of taxes until you begin withdrawals in retirement.

The regular contributions made with each paycheck represent the best example of dollar-cost averaging, buying fewer shares when values are high but more shares when prices fall. Any matching contribution from your employer represents free money, so be sure to contribute at least enough to maximize that benefit.

If your employer offers a Roth 401(k), your contributions are made with after-tax dollars, but withdrawals in retirement will not be hit by taxes at all, allowing you to keep your entire nest egg. For more information, see the retirement channel of Bankrate.com.

7. Make an IRA contribution

If you or your spouse has earned income, then each of you is eligible to contribute to an individual retirement account. For 2016, those under age 50 can contribute a maximum of $5,500 per year -- assuming your earned income is at least that much -- and those 50 and older can contribute up to $6,500, thanks to the permissible catch-up contributions.

You can open an IRA with a bank, credit union, brokerage firm or mutual fund company and invest the contributions however you choose. An IRA can be a great way to supplement the asset allocation of your workplace retirement plan, where you may be limited to an available menu of investments.

With an IRA, you can choose investments that may not be available in your workplace retirement plan such as commodities, individual stocks or certificates of deposit, giving you access to investment options that result in a more diversified portfolio.

A traditional IRA offers tax-deferred savings, while a Roth IRA offers tax-free savings for retirement. With a Roth account, you won't get an immediate tax break, but you won't pay any tax on your money when you eventually take it out. While directly contributing to a Roth IRA is limited based on household income, converting a traditional IRA to a Roth IRA is not.

8. Sign up for a flexible spending account

Almost everyone incurs costs for medicine, prescriptions and doctor's visit copayments. Perhaps you also have dependent-care expenses while you're working or pay commuting costs to get to work.

If your employer offers a flexible spending account as part of the benefits, consider signing up.

A flexible spending account, or FSA, allows you to pay for medical, dependent care or transportation costs with pretax dollars set aside with every paycheck.

By paying with pretax dollars rather than after-tax dollars, you're essentially getting a discount on all these expenses you regularly incur.

How big a discount? It depends on your marginal tax bracket, but those in the 15% bracket are saving 15% by paying with pretax money rather than money that has already been taxed. Contact your employee benefits department to get specific information.

9. Consider a rewards credit card

Do you always pay your credit card balance in full? If so, you're the ideal candidate for a rewards credit card. With a rewards credit card, you are compensated in the form of cash back, airline miles or one of many other methods for everyday purchases you make.

Identify what type of reward is most appealing to you, and compare card offers based on what percentage of your purchases are paid out in rewards. While a 1% reward ratio is the most common, many cards have higher payouts, either for certain categories of purchases or for everyday spending.

In fact, a 2013 Bankrate.com survey of cash-back credit cards found 1 in 7 cash-back cards has a payout of greater than 1% on all spending and 46% offer higher payouts in certain categories of spending, so it's important to shop around.

Finding the card that best fits your spending pattern can put hundreds of dollars per year in your pocket for expenses you'd incur anyway. The keys to success are always paying the balance in full and resisting the urge to overspend just for the sake of the reward. Check out Bankrate.com's search engine to find the best rewards card for you.

10. Shop around for lower-cost insurance

Cutting expenses is a surefire way to boost the amount you save, and insurance policies are low-hanging fruit when saving money. Shop around for lower premiums on the various insurance policies in your household -- homeowners or renters, auto, umbrella, liability and life insurance.

Ready for a double dose of good news?

Another benefit of having some emergency savings socked away is that this savings begets further savings by allowing you to increase your deductible, further reducing your insurance premiums.

Be sure to check out the insurance channel at Bankrate.com to start your search for the best deal.

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