QUESTION: How can I start putting more money into savings?
ANSWER: If you're scraping by financially, saving money is nearly impossible. But if you make decent money and still find yourself with a near-empty savings account even before holiday shopping season starts, a few habit changes could help.
Think of your savings account as an emergency fund that you're slowly and incrementally building. Experts recommend enough savings to cover three to six months' expenses. The end figure can be daunting. If your expenses are $2,000 a month, you'll need to save between $6,000 and $12,000.
If that seems impossible, remember that having even a small amount in savings can be an important cushion.
"If three things happen in a week: You lose your glasses, the car repair is $164, and the dog needs shots, you won't be putting it on your credit card; you'll reach into savings," said Catherine Williams, vice president of financial literacy at Money Management International, a nonprofit credit counseling service.
How to Start?
"There's a million budget books out there. Don't buy them," Williams said. While some books go wild with tips like cutting your own hair, changing your own oil, and giving away your pet, she's found the easiest way to start socking away more savings is to find simple places to trim spending.
Food and entertainment are simple places to cut back. Skip two lattes a week, and you could save $416 a year. Rent one DVD at a time and save on late fees."I'm not saying people should totally give things up, and say, 'I'll never go to lunch again' or 'I'll never get my nails done.' It's changing some very small things," she said. "It doesn't mean wearing plastic bags instead of rain boots."Set a budget, said Greg McBride, senior financial analyst at Bankrate.com. That gives you some spending restrictions, plus a realistic idea of how much you can save.Think of your emergency fund as a bill you have to pay. If your company has automatic payroll deposit and you are already making 401(k) contributions, direct some of your pay into savings. You may want to start with 2 percent, then ratchet up. If you bank electronically, set up a monthly transfer from your checking account into your savings account.If you get a raise, bank it. After all, you're used to living on less. If you get an annual bonus or a tax refund, put as much of it into savings as you can.If you pay off a debt, like a credit card, a car payment or a student loan, continue to write a check each month for that amount -- and put it into savings.Set goals. Once you have a month of expenses put away, celebrate with an inexpensive outing for yourself and your family. Try a day in the park instead of a day at an amusement park. Or make your own ice cream sundaes at home with a rented movie instead of an expensive night out at the movies.
"Get creative," McBride said. "You're looking for ways to not only boost your savings, but also ways to cut your spending. This can be things like piling all your spare change into a jar or setting aside whatever money you save with coupons at the supermarket. Come up with a household contest. Get everyone involved."As you build the savings account, think of it as untouchable. If you have a debit card for your savings account, cut it up. If it comes with checks, stash them in a drawer.Finally, make sure you've found the best savings account. You can find yields as high as 4 percent, available nationwide, with no minimum deposit, McBride says. Bankrate.com has a list."I've worked with lots of people," Williams said. "They've found that about the time they get $800 in savings at the bank, they get excited. Eight hundred dollars is a lot of money; it's not chump change. Their lifestyle doesn't change at all. They do it the old- fashioned way, putting away one dollar at a time."Source: Buffalo News. Powered by Yellowbrix.
