12 Ways to Get into the Savings Habit
- Establish goals—Need to set up an emergency fund (a minimum of three months' pay)? Pay off debt? Save for a new car? Pay cash for all holiday gifts? Retire at 50? It's easier to get somewhere when you know where you're going.
- Pay yourself first—Determine what you can put in savings, then budget to live on what's left.
- Use Direct Deposit to save systematically by assigning a portion of your net pay to your savings account. Many find this "out-of-sight, out-of-mind" method to be pretty painless.
- Look for "found" money-you won't miss it because you haven't been seeing it anyway:
- redirect to savings the payment for a paid-off car loan
- deposit pay raises and bonuses in savings
- Always keep your savings a little out of reach in a separate account from your checking.
- Don't spend the coins you receive as change from a purchase. Collect them over a period of time, then deposit in your savings.
- Likewise, set aside the money you save with cents-off coupons.
- Contribute as much as you can to your 401(k) or Thrift Savings Plan. At a minimum, save enough to get your employer's full match—it's like free money!
- Upgrade to a higher interest-earning account as soon as you've saved enough to meet the minimum. Certificates generally pay higher dividend rates than regular savings accounts. Some have minimums as low as $100. Earnings are guaranteed and insured up to $250,000 against loss by the federal government at most financial institutions.
- Consider stocks and bonds (start with mutual funds) to earn greater, but not risk-free, returns.
- Start the kids out early. Help them identify goals—a new computer game, a DVD, new sporting equipment, even a movie ticket. Open a savings account for them so they can deposit cash gifts and allowance in a dividend-earning account. Then help them set up a simple budget. To give them a jump-start, consider matching the amount they put into their account.
- When life gets more complex—you're earning more, looking to buy a home or you're married and wondering how you'll get your kids through college—seeing a financial planner can be a smart move at any of these junctures. They can help you:
- update your spending plan
- start an investment portfolio
- select the mortgage program that's best for you
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