- Personal Finance
How Can I Save Money?
Now that the holidays are completely over and 2014 is here, it may be time to consider ways to save more.
Budgeting and Financial Planning is different at different stages in life. Older people are often focused on planning for a comfortable retirement, while younger people often want to plan for multiple situations like immediate goals, car & vacation, children’s education, etc. No matter where you are in life, saving money will help you achieve whatever goals you've set. No matter your income level, having a plan will help you set realistic goals and figure out the best way to reach them. Before you start your savings plan, try this:
- Prioritize your goals into three categories: Needs, Wants & Dreams. Take a piece of paper, divide it into three columns and make a list for each category. This will help you get a better overall picture of your financial situation.
- Needs: are the nonnegotiable, inescapable basics like your monthly bills, such as rent, utilities and existing debt. This category also includes maintaining appropriate insurance, saving for your children’s education and your own retirement.
- Wants: are goals that are important but don’t need to be taken care of by a set time—car, a home purchase or improvement
- Dreams: are the frosting on the cake, a little further off in time: a vacation home, a boat, early retirement.
Once you've identified these three areas, you must formalize a plan. Here are some tips on saving money.
How to Save Your Money
Automatic Savings When it comes to saving, “out of sight, out of mind” is a good rule to follow. If money that’s earmarked for savings goes directly from your paycheck into an account that’s not easily accessible, it will be much harder to spend it. Use direct deposit of your paycheck and allocate an automatic savings amount into a designated account.
Automatic Bill Pay To make sure your bills are paid on time, arrange for electronic bill payments. The days of writing checks and mailing them are over. Take advantage of this speedy way to pay. Many payments are credited the next day, which can give you more time to manage your accounts if you’re a little “short”.
Make the most of your employer’s help Maximize your savings by signing up for 401K investments. It never ceases to amaze me how many younger employees waive this plan. A $25 weekly contribution in most cases will earn you a million dollars over time if you start early and stick to it. If you can’t invest the maximum amount of the company match, start at just 1% of your salary. Every time you get a raise, invest another percent. Remember, money you don’t see is usually not missed. Believe me, you’ll be glad you did.
Put “found money” into savings We talked about your salary increases earlier, but this also includes any gifts, bonuses or tax refunds you receive. Don’t treat these windfalls as an invitation to spend. Treat them as an invitation to save. A good rule is to save at least half of the windfall and use the other half for bills or a treat.
Smarter Spending. Find ways to save money by identifying ways to shop smart like using coupons. Take your lunch to work instead of buying lunch everyday. Save the savings.
Suze Orman- 3 tips to save money
Other Money Saving Tips
Paying off debt is even more important than setting aside savings because debt grows at a rate that far exceeds the rate of savings growth.
- Get your credit cards under control. Try to pay the full balance every month. If you can't do that, focus on never missing a payment and paying more than the minimum amount. Strive to pay off the higher interest cards first.
- If you have student loans, consider consolidating them. It will be easier to pay off.
- Pay bills by due date to avoid late fees. Late fees add up and put you further in debt. Your credit score will be helped if you pay bills on time.
- Be patient. Paying off debt can take a long time. Every single dollar you put toward debt is making a difference.
Financial planning, budgeting and saving money may seem daunting, but it's important to start when you're young. The sooner you start, the more time your money has to grow. Even if you can only afford to set aside a little bit at a time at first, you'll still be having a huge impact on you and your family's future.