Simple budget hacks that make a big difference

Many budget hacks will save you pennies, but some can save you hundreds or even thousands of dollars over time. Try these to make a significant impact on your finances this year.

Tax Optimize everything

I’m not here to give you tax advice. I highly recommend having this done by a professional. And I also suggest that the first thing you ask him or her is how to optimize absolutely everything related to your taxes. Things to ask about include:

• Any tax credits you may be eligible for, such as The savings balance, Child tax creditor Premium tax credit
• Adjust your tax withholding to avoid paying too much and waiting for a refund
• Save in things like health savings accounts and dependent care flexible savings accounts if these apply to you (both are tax deductible, allow savings to grow tax-free and allow tax-free withdrawals for eligible expenses)
• Maximize all other tax deductions
• Literally everything your advisor can think of that will help you pay less tax

Minimizing your tax bill as an ordinary person with an ordinary income can still save you more than you might imagine. And you’re not doing anything wrong by making sure you optimize legal tax strategies.

Many working Americans pay too much taxes (often on purpose), where underpayment (including intentional tax evasion) is often the case higher among people with higher incomes.

In other words, while the very rich complain about the drain on the working class who have to live off the system, they are often the ones paying less in taxes than they should, while the working class often pays too much.

Live ‘One Raise Behind’

One way to really increase the actual money you have in the bank (or in your investment accounts) is to simply ignore the spreads you get. If you are already doing well, you will receive a pay increase or promotion. It’s worth just pretending that’s not the case.

Instead of spending the extra money on a series of lifestyle upgrades that you could live without, divert that money toward savings and investments — or toward paying down debt if you need to.

Some people decide to simply live “one raise behind” so that they will invest the very first raise they ever get and only upgrade their lifestyle a bit when the next one comes along. This helps you always live within your means, keep your lifestyle under control and build a healthy buffer.

You can do the same with bonuses, unexpected commissions, or other “extra” money that you don’t absolutely need to use for immediate needs. You may find that the peace of mind is worth more than any luxury you’ve spent.

Automatic roundups

We all tend to complete everything in our heads when we spend money. The $38 meal cost us about $40, and the vacation that cost $1,900 sure feels like a $2,000 trip. Now technology can actually do that research for you and throw away the money you thought you spent anyway.

Apps like Acorns and Monzo can be set to automatically round up every time you spend money, directing the collected money into interest-paying savings accounts. For most people, this probably won’t have as big an impact as the two tips above, but it’s a simple, automated action that can really add up over time.

Do you have any big budget hacks that have made a big difference for you? Feel free to share.

About the author

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks, and the occasional award-winning short story. Her work has appeared in a range of publications, both online and offline, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn more about Karen