Acquire Ideas - Not Things
Be Wired to the world around you.
The Best Things in Life are Free
A family trip to the beach would cost most Americans over $1000 in airfare and hotel fees.
You can go for the cost of a 1/4 tank of gas.
How to Make a Savings Habit Stick
Commit to a month.
Find an accountability partner - call them if you are on the verge of making an unnecessary purchase.
Find a savings role model who is successful with their money, through tried and true savings.
Write your goal down - track it.
Avoid tempting situations.
Different Types of Savings Funds
When you start a personal savings fund, you should have a clear understanding of what you are saving for. Understanding your saving goals will help provide the drive and motivation to save. For example, your goal may be to save for a home, for emergencies, or for college.
There are many reasons why people have savings funds. Three of the most common reasons are:
Emergency Fund: One of the most important types of saving funds is the emergency fund. You should save money for emergencies to avoid going into debt to pay for them. This could involve any number of unexpected issues: a job layoff and sudden loss of income, an accident resulting in out-of-pocket medical expenses, or other costly issues you can't avoid. Ideally, every family should have enough money saved in their emergency fund to last six months. This money is to cover the basics: rent/mortgage, food, utilities, etc.
Investment/Retirement Funds: Once your emergency fund is set, you should begin saving for retirement and long-term investing within a separate account. As you accumulate savings funds in your retirement/investment account, you can begin to look for ways to invest your money. A good way to start is to invest in a certificate of deposit (CD) at the bank. The interest rate paid on a CD is generally a little higher than on a savings account.
Special Savings Accounts: Special savings accounts are often considered "fun" accounts. These accounts are set up with a specific goal in mind, such as to save for a birthday present, an anniversary, or a family reunion. You can use an envelope if the amount you plan to save is not too large, or to be safer you could open an account at a local bank for this purpose. One of the best benefits of special savings account is that they keep you from using credit cards or having to borrow for these special occasions.
Saving money can be difficult if spending on immediate needs always seems to take priority over saving. However, if you are serious about saving money, you must make a commitment to doing so.
There are two ways to save money:
The first is to save before you spend.
The second is to save after you spend wisely.
Both ways require your dedication and commitment.
Two Ways to Save
Both ways of saving money require you to have a spending plan and to budget effectively. The first method of savings is to pay yourself first.
Paying yourself first is a method that goes back many years. Farmers would keep a certain percentage of their harvest to feed their family before selling or trading the rest of the harvest. Paying yourself first requires that you deposit a certain percentage of your paycheck (your harvest) into your savings account.
How does it work? Prior to paying any of your bills and other expenses, you literally pay yourself first. You can decide to pay yourself 5 or 10% of your income, or less if 5-10% is simply not possible. As soon as you are paid, put the pre-determined percentage aside, ideally in a separate savings account, before you pay your bills. Even if you can only "pay yourself" 3 or 4% of your earnings, you'll still have more to put into savings than you did before you began the process.
The second method way to save is first spend more wisely. For example, you take a look at your spending plan for a first month and you see that you spent $60 on snacks during work. Ouch! For the next month, you budget to spend only $30 on snack food. At the end of the month, you'll have $30 extra you didn't spend that can go into savings!
Effectively managing your spending plan helps save you money. Some months you may not be able to save as much as other months, but keep your goals in mind and try to adjust your spending so you can save as much as possible.
Getting Started on Your Saving Strategy
For many, the hardest part about creating an effective savings strategy is getting started. You may think "I just don't make enough money" or "I have too many expenses to put any money into savings". But you can prove to yourself these things aren't true. Let's examine ways to get you started on savings.
Paying off credit cards: Paying off credit cards is not impossible, but it does require setting a goal that makes paying off your credit cards a priority. This begins with taking inventory of all your credit cards and how much you owe on each card. The next step is deciding which credit card you will stop using first. Once that is decided, take that card and cut it up. Send as much money as you can each month to pay off the card. You are now rid of one card. Repeat the process until all the cards are paid in full. Sure, it won't happen overnight but it will happen if it is your goal!
Price comparison shopping: In the Budgeting module we discussed ways to comparison shop and also using the 24 hour rule to keep us from impulse buying.
Save your change: Have a place (a jar works well) in your home where you can put your pocket change. When the jar is full, deposit the funds into your savings account.
Be a smarter food shopper: Always shop with a list so you only buy what you need and avoid impulse purchases. Take advantage of "buy one, get one free" offers but only on items you already buy -- the same goes for coupons. Buy generic/store brands -- they are usually made by the same companies as the name brands, just sold with different packaging for less.