You probably already know it’s a good idea to save money. In hard economic times,
you need to have savings to fall back on in case you lose your job. It’s also important
to save money for retirement. You may also want money for travel or need it for unexpected
With tight budgets and rising prices, it may seem harder than ever to save money.
Start by setting your goals. These should include:
Write down any other important goals. If you have children, for example, you may want
to put aside money to help them go to college.
Pay yourself first. That means take money from every paycheck and put it into savings, the same way you
put money toward rent or a mortgage. Experts recommend setting up an automatic transfer
from your paycheck to your savings account as a way to do this.
Make other types of savings automatic. If your employer offers a retirement plan, pay the maximum amount into it, if possible.
Have it deducted automatically from your paycheck.
Look for a match. Your employer may have a savings program such as a 401k to which the company will
contribute if you do. Even a small amount from your employer adds up in retirement
savings over the long run.
Every bit you can save counts. Even if all you can manage is a few dollars here and there, it’s a good start.
Pay in cash when you can. It’s easier to overspend when you use a credit card.
Keep track of all your expenses. If you aren’t sure where your money goes, keep a careful record for a month. You
may be surprised where you are spending money instead of saving. Cut back on extras
and put the savings into an account. Some ideas for saving include:
Make coffee at home instead of stopping for a daily coffee.
Pack your own lunch and drinks for work.
Cut down on eating out.
Find low-cost ways to host social events at home.
Shop for kids’ clothing at secondhand stores. You can save a lot more if you buy a
pair of kids’ jeans for $3 instead of $30 or $40.
Check out secondhand stores for yourself as well. Many have designer clothes that
are in excellent condition.
Take a second job. If your budget is tight, it might be worth taking a part-time weekend job for a while
just to boost your savings.
Look for interest. Stashing cash money in a jar may keep it safe, but it also means that your money
is not working for you. Find a savings account, CD, or another plan that will earn
interest over time.
Do your research. Remember that investments called “high risk” can bring in a lot of money, but that
your money can also disappear. Don’t invest any money in high-risk investments unless
you can afford to lose it.
Start young. Begin saving with your first job if you can. Increase your savings as you earn more.
Even if you save $2,000 a year from ages 19 to 26 and then stop saving, with a 10%
return on your invested savings along with compounding interest, by the time you are
65 you will have $1,019,148.
Don’t withdraw from savings. If you can avoid it, leave saved money in an interest-bearing account. Retirement
and college savings programs may charge you a lot of money to withdraw savings early.
Make sure you understand how those penalties add up.
Downsize. Think about whether you need as much house as you have. Moving to a smaller home
could cut costs and give you more savings. Aim at spending less than one third of
your income on housing.
Take in a roommate. This can potentially add thousands of dollars to your yearly savings’ account. Interview
applicants’ employers and past landlords, and get their written permission to do a
background check on them, including a credit and criminal history report. Only after
he or she proves to be reliable should you sign a lease with a tenant.
Avoid debt. Keep your total debts down to less than 10% of your assets. Money you spend to pay
down debt is money that can’t go toward savings.
Put most of your bonuses or raises toward savings. Don’t add more expenses. If you make more money than expected, put it into savings
rather than spending it.
Other ways to keep your savings on track are to avoid big unexpected medical expenses
that will eat up your hard-earned money. For this reason:
By working on these steps, you’ll be able to build your savings over time. Check your
savings to see how you’re doing every couple of months. Fine-tune your strategy if
necessary, and enjoy the extra security that savings can bring.