Dipping into your savings may happen more often than we’d like–emergencies, unexpected expenses, and even special events–can all creep up on you and lead to pulling money out of your nest egg.
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To prevent you from borrowing against your future, experts say there are other strategies you can take to deter you from resorting to this option.
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Maintain Multiple Savings Accounts
“Having multiple savings accounts is something I’ve found can help with this,” said David Kemmerer, CEO of CoinLedger.
“Sometimes there are instances that come up where you need a little more money in a month–like if you’re driving more than usual and end up paying more for gas, or hosting friends from out of town and paying more for groceries, etc,” said Kemmerer. “In these cases, I find it useful to have a more flexible or fluid savings that can be dipped into for these types of expenses along with regular car maintenance, unexpected–but non-emergency–vet visits, and more.”
He also recommends maintaining an emergency or long-term savings that you cannot touch. “Making this distinction can help ensure your emergency fund grows steadily, while still giving you access to extra funds when you need them.”
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Make Savings Inaccessible
According to David Bakke, financial expert at DollarSanity, the easiest way to avoid dipping into savings for expenses they weren’t meant for–is to make your savings inaccessible.
“As a quick example, if you ramp up your 401(k) contributions to the highest level possible, you cannot immediately access that money,” said Bakke. “Of course, you’ll probably want to make sure that you have a healthy emergency fund in place so you have accessible cash if an emergency arises.”
Instead Of Spending, Work Out
If you find yourself in situations where you’re just spending money for the enjoyment (or the “high”), skip that and replace it with exercise, says Bakke. “I’ve actually done this and it works. Instead of logging onto Amazon, go do a bunch of pushups, situps, and anything else you can think of. Problem solved.”
Find A Partner
“If you’re trying to avoid dipping into savings, chances are you have a friend or family member who is too,” said Bakke. “Partner up with them and attack the issue collectively. Maybe you agree that a phone call or text is in order before savings are dipped into. With this strategy, chances are that your partner will talk you out of any ill-advised purchase.”