When it comes to personal savings, getting started is the hard part. Few people would disagree with the concept that having a cushion to see one through emergencies and to provide against the day when retirement becomes a reality is a good idea, but a surprising number of people don’t get around to starting a savings program until it is very challenging.
Facing reality is a good place to start. Know precisely how much income you have. Don’t confuse gross income with net. Don’t forget such items as taxes that automatically reduce your take-home pay. Consider all the sources and don’t fudge. You can’t establish a savings system on shifting soil. Then apply the same realistic appraisal of your outgo. The difference between the two is the logical launching point. It may require some adjusting to create the leeway you need to set money aside.
Benjamin Franklin said it first: “Spend less than you earn.” It is only common sense that you can’t save anything if all your income is devoted to current living expenses. A little belt-tightening is requisite if you are serious about building a hedge against future needs. Consider these steps:
Discern between wants and needs. A little economy now will mean a lot less stress later on. Consider the relative advantages between buying an amenity-stacked vehicle, computer or electronic equipment or having a little cushion in the bank. What you could save by eliminating just a couple of trips to fast-food outlets in a week could provide the seed money for a savings account. Don’t complain about not having enough money to save if you are making frivolous purchases on a regular basis.
Use the resources offered by your employer. Many companies offer opportunities for savings plans, with the money automatically deducted from your paycheck each pay period. Some companies even offer a match of some kind as incentive for you to save. Investigate.
Seek professional help. Information about common-sense money management is readily available online, at a library or through publications put out by financial institutions. Dozens of tools are available to help you keep track of your money, including budgeting, meeting short-term and long-term goals and saving.
In the current economic climate, banks are actively promoting savings plans. Some offer ways to save automatically through your debit card or automatic deductions from your deposits. Ask. Some have a plan that allows you to round up purchases to the nearest dollar, with the additional money going into your saving plan. Over time, small change can add up to real savings. You may find that you have more peace of mind if you control the amount going to your savings by arranging for a transfer of a certain amount of money to your savings account each deposit period.
Compound interest is your friend. Putting money into a low-interest plan may be the way to get started, but consider moving into an investment account when you are ready. You’ll earn more money. Investment and retirement accounts provide more interest over time.
Practice frugal banking. Look for a bank that offers free checking, automated savings and the ability to withdraw cash from an ATM. But be sure to document your ATM transactions. It is easy to lose track if you don’t. Do whatever you can to minimize outgo and capitalize on what you are able to save.
A raise or a windfall from some source outside your normal income is an opportunity to build savings. Avoid the temptation to adjust spending upward until you have contributed to your future well being by adding to your financial cushion.
The time to start is now. The future is just around the corner.
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