Four things you should know about saving your money
- Substantial's been telling stories since early 2012. Here's one from the archives.
1. Save before you spend If you’re not doing it now, you have to find a way to save and the best thing you can do to help yourself is automate. If the money lands in your checking account and you see it on your ATM receipt, it’s too easy to find some “need” to spend it on. Arrange for it to be swiped out of your checking account before that happens and put into an IRA or other savings account.
2. Prioritize your savings Emergency fund first: If you’ve heard it once, you’ve heard it a hundred times. You need at least six months of living expenses – in cash – just in case. When you first start to have money to put away, it’s important to fill up this bucket first. That way, you have cash to fall back on when the roof leaks or the computer breaks and you don’t have to reach for the credit cards. Put this money in a boring old savings account, where you may not earn much interest but you can get at it if you need it. Contribute, contribute and contribute: A 401(k) is one of the easiest and best ways to save for retirement. Contributing money to a 401(k) gives you an immediate tax deduction, tax-deferred growth on your savings, and — in some cases — a matching contribution from your company.
3. Set a realistic savings percentage per month Start by saving 2 percent per month. It will force you to cutout the small things that you probably won’t notice. Avoid a “crash diet” savings approach (setting unrealistic goals just like some people do with food) in order to guarantee long-term savings success. Almost ANYONE can save 2 percent. In the long-term, aim to save 10 percent to 15 percent per month, but you can’t start there. Start small and up it as you go along. Something is better than nothing at all.
4. Save when you can When you find yourself with some extra cash, don’t go out on a shopping spree. Resist the urge to spend it all. You never know what the future may bring. At the end of the day there is no magic formula or top secret way to save money. It’s about ones mental ability to live within their means, prioritize, save before they spend, and set goals.