What might happen if you went on a financial diet?
According to findings from GOBankingRates, Americans could save an average of $5,339 a year by cutting some discretionary spending, CNBC reported. That’s how much individuals spend on non-necessities like coffee, eating out, entertainment, clothing, ride shares, and alcohol. Break that number down, and you’re looking at an additional $445 a month that could go toward retirement contributions or an emergency savings account.
Want to fight the norm and set yourself on a course for greater financial strength? Here are five ways to trim your budget for both necessary and discretionary spending and potentially save big in 2021.
1. Capitalize on DIY
The coronavirus pandemic prompted many stay-at-home Americans to tackle DIY home improvement projects. While it’s a great way to pass the time, it’s also a great way to save money. A 2018 report from the NerdWallet personal finance website found that the median cost of a DIY kitchen renovation/addition is $22,000 less than the median cost of hiring a professional to do the work.
The money you save from a DIY project can be put toward things like reducing high-interest debt, starting an emergency fund, or bulking up your retirement accounts.
2. Reduce Credit Card Debt
Statistics compiled by the Experian credit bureau indicate that average credit card debt in the U.S. last year was $5,314. Chipping away at that debt can put more money in your bank account and could improve your financial outlook.
In November 2020, the average interest rate on an interest-charging credit card was 16.28%. If you pay your credit card bills in full every month, then interest isn’t an issue. But if you carry a balance from one month to the next, your interest charges could add up to hundreds or even thousands of dollars a year. In total, American consumers were paying $121 billion in credit card interest and fees by the end of 2019, according to Investopedia.
3. Negotiate Your Bills
It seems like we’ve got more bills than ever—video streaming services, internet service, wireless service, and insurance premiums, to name a few. But you’re not necessarily stuck with your current payment amounts. You may be able to negotiate lower costs by contacting the companies that send you these bills and asking for a rate decrease or by enlisting help from a professional negotiator like Truebill, BillFixers, Billshark, or BillAdvisor.
The savings you pile up from negotiating your bills can be applied to decreasing credit card debt, setting up an emergency fund, or putting extra cash toward retirement.
4. Kick the Coffeehouse Habit
The NextAdvisor personal finance website estimates that you could chop $1,000 to 2,000 a year in discretionary spending by brewing coffee at home instead of picking it up at a coffee shop like Starbucks. That $1,000 to 2,000 could help you percolate better financial health. For instance, you may want to shift that money to your retirement accounts, thereby caffeinating your retirement strategy.
5. Max Out IRA Contributions
You may be falling short of what you’re allowed to contribute to your IRAs.
For 2021, the maximum amount you can contribute to all of your traditional and Roth IRAs is $6,000. It’s $1,000 higher if 50 or older. Be sure you’re taking full advantage of these IRA contribution limits if you’re not already doing so.
One component you may want to add to the IRA mix is a Self-Directed Precious Metals IRA. This type of IRA lets you hold alternative assets like gold, silver, platinum, or palladium. Among other benefits it provides, a Self-Directed Precious Metals IRA can diversify your portfolio, hedge against inflation and a weak dollar, and offer a safe haven for protecting your wealth.
You can start saving money today. Put these practices into place to help set yourself and your loved ones up for future financial success. Contact U.S. Money Reserve today to learn more about Self-Directed Precious Metals IRAs.