Simple Ways to Start Saving
I frequently see the frustration in peoples’ eyes when they are living paycheck to paycheck and don’t know where to start when it comes budgeting and saving/investing. While I like to gear my advice to the younger generation in the hopes of getting them started on the right foot, I’m well too aware that there are plenty of people in my age bracket and older that would benefit from good financial practices and even get themselves back on track.
My biggest tip: Open a Savings Account. No matter what you think, unless you have a place to put your money that is out-of-site and out-of-mind, you’ll always find an excuse to dip into it. I really love the online accounts that are readily available these days, whether it be ING Direct, Emigrant Direct, or any of traditional banks who are now offering online accounts outside of their traditional market. Best of all, the online accounts typically have a 2-3 day lag time between your electronic transactions - which is usually enough to stave off any impulse temptation to withdraw funds.
Assuming you’ve got a place to stash your savings, here are some simple tips to start putting some money away.
1. Schedule a recurring deposit from your checking account to your savings account timed a couple days after each paycheck. Start small if you need to, but the key is saving that money when you get it rather than waiting to see what’s left over. Assuming you are paid twice a month, $25 per paycheck is $600/year.
2. Give up one of your vices once a week. Everyone has something they do regularly that they could easily give up once a week. One of mine is dining out for lunches during the work week at average of $6 per day. To make this work, the day you skip your vice, immediate push a deposit to your savings account for the money you would have spent. Smokers, skip a pack a week. I won’t lecture you on what you are already throwing away, as I was one, but I know there are plenty of smokes in a given week you waste. Pick a day to skip a pack and budget your smokes in advance to get you through. Social drinkers - especially my college readers - same thing, skip a night at the bar.
3. Getting a raise at work? For the first six months, automatically deposit the difference between your new check and the old check. You won’t miss your increase given you’ve been living on the smaller amount and after 6 months you’ll have seen enough of the results that I doubt you’ll stop.
4. If you have an Debit card and are going shopping, leave it at home and withdraw the cash from your checking that you plan on spending. When using plastic - be it a credit card or debit card - you are more likely to spend more than you intended vs. spending cash. When your shopping is done, deposit what is left of your budgeted cash.
5. Trim the fat. Everyone has a few expenses that aren’t being used that could be trimmed. Things such as premium movie channel packages on their cable bill, unused gym membership, a more expensive call plan on your cell phone than the minutes you are using, etc. Scale them back and deposit what you were spending.
6. If you are still using checks, when your record your payment in your check register, record the actual amount along with the payee on the payee line, but in your running balance, round the amount up to the full dollar. When you balance your check book each month, deposit your ‘change’ in your savings account.
Audience participation time, what tips and tricks do you have for putting away money?
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