Ways to save money
Times are tough and going to get tougher. You must save money and I know 7 ways that can certainly help to achieve just that. First, stop spending too much. Analyze you monthly spending, find ways to cut back and then save whatever money left at the end of the month. Keep yourself from slipping back into wasting money and don't get too frustrated if it happens. This is just a first step, you must start saving in earnest. Understand that spending is often disappointing and follows by buyer remorse, be it new shoes, wardrobe, car or house. Worse still, once that initial delight passes and remorse kicks in, you will be looking to buy something else in a hurry.
If you can't control your spending, you must find other ways to save money. Forget trying to cut spending and save whatever is left. Now make saving you primary objective and live on whatever money remains. As soon as you get that paycheck, save away a nice chunk of the money. Try to put them into something where you can't withdraw them without penalty for extra motivation, like 401(K) or Certificate of Deposit Account. You can find banks with CD accounts that require as little as $500 to open. Then you will be forced to survive on whatever is left, but you surely can do it.
And I am sorry if the Save Your Money First approach sounds a bit rough, but even if you cut your spending from 90% of paycheck to 80%, you will double the saving rate from 10% to 20%. For $3,000 take-home each month, it means saving $600 monthly instead of just $300.
Now, there are many who advocate investing over saving. Sure thing, but you have to save first to have money to invest. While it is quite helpful to earn good investment returns to amass a nice little fortune, good savings habits will take you much further than investments alone. Once you save a decent chunk of money, you can invest much more and get very healthy results. You should commit to saving 15% to 25% of your income every year, more if you can, for 12 to 17 years. Earlier start often means much better returns.
Don't be discourage initially when you first start saving and investing, if your wealth is growing too slow. Persistence and patience may very well bring your portfolio to the point when your investment gains outshine your savings. At that point, you will realize how rewarding saving will have been, and you will happily put away as much money as you can afford. It is reaching that point is the hardest part for so many.
So here are 7 ways to save money. Follow them and you will be all right,
1. Start putting money into your employer 401(k) plan. Initially you should invest enough to get any matching employer contribution. That way, the money will be saved before you get a chance to spend it. Since 401(k) deduction from your pay check is not taxed, putting $300 monthly in such a plan will not lower your take-home paycheck by $300 but by significantly smaller amount. If you see you can afford to save more money with 401(k), adjust the amount. Many plans Fidelity included, let you adjust contribution amount on a monthly basis.
2. Invest some money into mutual funds on a monthly basis. Find a good mutual fund or two and see if you can invest by setting up automatic direct withdrawal plan from your bank account in the funds you choose. Some mutual fund companies waive their regular investment minimum if you commit to investing automatically. Alternatively, huge number of very solid companies today allows you to buy their stock shares directly through DRIP or Dividend Reinvestment Plan. Of course, every investment has its own risks.
3. When you receive a pay raise, increase your 401(k) contribution and/or your automatic monthly mutual fund investments, instead of buying a new car you totally deserve or financing a new kitchen you can't live without.
Living frugal will also make it easier for you to retire, because you will get used a more modest lifestyle. So instead of needing 75% or 80% of the pre-retirement income to maintain your standard of living as many retirement gurus claim you would need, you will be be able to retire comfortably with just 50% or 60% of your pre-retirement income.
4. If you just made the last $300 monthly payment on your car, save this money. Don't buy a new car or spend it on something else. You survived without this $300 for 48 or whatever number of months you financed your car for, so it shouldn't be any great sacrifice to save this money.
5. Make a promise and keep it that you will save all financial bonuses like overtime pay, tax refunds, money from a second job, year-end bonuses, inheritance, car accident compensation, etc. Those are easy and painless sources for more savings.
6. Put the only money that you are allowed to spend in a separate checking account. You can't spend more than you have there, You can't touch saving accounts, mutual funds, retirement, etc, save for real emergencies.
7. Take your credit cards and put them away. Don't close them, don't cut them as you may need them for some unforeseen emergency. Try to live cash-only for a month, then for another, then for another yet, and before you know, you will be just fine with only a debit card.
So here it is, 7 sound ways to save money. One way, which you can find everywhere and I can't recommend is to put extra money into the mortgage principal. In ongoing housing nightmare, this money will be gone for good before you know it. Stay liquid. Paying off mortgage is quite stupid today. You may borrow from 401(k), you may even withdraw the money early, paying taxes and penalties. You can liquidate CD account if you have to and forfeit interest and may be some of the principal. But you certainly loose the access to your money or loose it for good, if the value of your house drops significantly. And the home values just keep on dropping.
Tue Apr 5, 2011 12:04PM | Copyright: www.bad-credit-advisor.com | More in Personal Finance | Comments (0)
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