Smart Ways to Save Money

Comparing Different Methods to Save Money (and Why a Personal CFO Can Help You Win Big)

Saving money is important, but with so many strategies out there, how do you know which way to save money is right for you? Let’s take a look at some popular methods, pair them up, and break down how they compare. We’ll also dive into why hiring a personal CFO to guide you through your financial journey could be one of the smartest moves you make.

The 50/30/20 Rule vs. Pay Yourself First

• 50/30/20 Rule: This budget divides your income into three simple categories: 50% for needs, 30% for wants, and 20% for savings. It’s a straightforward way to manage your money.
• Pay Yourself First: Here, you prioritize your savings by setting aside a portion of your paycheck for savings before spending on anything else.

Compare & Contrast:

• The 50/30/20 Rule gives you structure and keeps spending balanced, while Pay Yourself First puts savings front and center. If you struggle to save, the latter might be more effective, but if you want balance across all areas of spending, the 50/30/20 rule helps you keep track of everything.

How a CFO Helps: A CFO can help you tweak these methods to fit your personal situation. Maybe you don’t need to stick to the exact percentages in the 50/30/20 rule, or you want help deciding how much to pay yourself first.

Certificate of Deposit (CD) vs. Money Market Account

• Certificate of Deposit (CD): With a CD, you lock your money in for a specific period in exchange for a fixed interest rate. It’s great for those who can let their money sit for a while, but there are penalties if you take it out early.
• Money Market Account: This is like a hybrid between a savings account and a checking account. You get higher interest rates than traditional savings accounts and can sometimes write checks or use a debit card, but there are limits on withdrawals.

Compare & Contrast:

• CDs are ideal for long-term savings goals where you don’t need immediate access to your cash, while money market accounts are more flexible. If you need to write a check here and there, a money market is the way to go, but CDs will give you higher rates if you don’t need the money for a while.

How a CFO Helps: A personal CFO can guide you on whether it’s worth locking your money away in a CD or if a more flexible money market account fits your lifestyle better. They can also help you balance risk versus reward, especially if you’re juggling different savings goals.

Round-Up Savings vs. No-Spend Challenge

• Round-Up Savings: This method is all about saving without really thinking about it. Apps or bank programs round up your purchases to the nearest dollar and transfer the difference into your savings.
• No-Spend Challenge: For a set period (like a week or month), you commit to not spending money on anything except the essentials, putting the extra savings toward your goals.

Compare & Contrast:

• Round-Up Savings is a gradual, automatic approach, great for people who want to save effortlessly. The No-Spend Challenge is more intense, giving you a quick savings boost by cutting out non-essential spending for a period. One’s slow and steady, the other’s fast and focused.

How a CFO Helps: A CFO can help you plan to save money for both long-term, automatic savings (like with round-up apps) and short-term savings boosts (like a no-spend challenge). They can also help you see where you can cut back without feeling the pinch too much.

Envelope System vs. Reverse Budgeting

• Envelope System: A very visual way to budget. You put cash in physical envelopes for different spending categories, and when the cash is gone, that’s it. No more spending in that category until next month.
• Reverse Budgeting: This method focuses on setting a savings goal first. You save what you need for your goal and live off what’s left over. It’s great for people who are laser-focused on hitting specific savings targets.

Compare & Contrast:

• The Envelope System is highly visual and strict, making it great for people who need a tangible way to stick to a budget. Reverse Budgeting is more goal-oriented, perfect for those who prioritize savings above all else.

How a CFO Helps: A personal CFO can help you with the discipline needed for the envelope system or help you strategize around savings goals using reverse budgeting. They’ll work with you to create a plan that fits your lifestyle and priorities.

Why Hire a Personal CFO?

At the end of the day, finding the correct way to save money is all about finding the right method for you. But here’s the thing — not every method works for everyone. A personal CFO can help you sort through all these options and build a customized plan that’s specific to your financial goals, lifestyle, and future plans.

They’ll help you:

• Track your savings methods to see what’s working.
• Optimize your strategies to reach your goals faster.
• Avoid common mistakes like penalties from early withdrawals or getting stuck in a method that’s not right for you.

Saving can be simple, and a CFO ensures you’re always making the most out of your money. You work hard for your cash—let your cash work even harder for you!