Do you visit your local coffeehouse each morning for that $5.00 latte? Do you go out to lunch every day with friends or co-workers? Do you smoke cigarettes? We all have guilty pleasures (and some not-so-healthy ones) that we regularly spend money on, many times without giving it much thought. If you brew your own coffee at home, there's a savings of $25 a week or $100 a month. That's a fairly easy way to begin a savings plan! The key is to start, no matter how small. It really adds up.
Basics of saving
Savings is a smart, short-term way to plan for a purchase. Whether it's a medical emergency, or unexpected car repairs, or just something you hope to buy, having cash available allows you to be prepared for life's surprises without worrying about using credit.
- Is short-term. The time frame is usually between 6 and 24 months from when you first start to save until you actually spend the money.
- Don't think of saving as putting away money you will never spend. You are just putting it away now so you can spend it later.
- You're better off putting your money in a savings account than hiding it in the cookie jar or under your mattress. Most financial institutions are federally insured against loss, so you know your money is safe. Look for the “FDIC” symbol at your bank or credit union.
Why is saving important?
It's important to get in the habit of saving. When you save for something specific, it can be very rewarding to pay for it in cash. The idea of waiting and saving for something is sometimes lost in today's culture of instant credit and immediate gratification. But the process of saving can be an enabling one. It allows you to take control of your finances rather than having your debt control you. Your financial picture is always improved by not having to take on any new credit.
Remember, the important thing is to start. Even if it's a small amount at first, the savings will add up.
How to start saving
Here are some smart tips to successful saving:
- Set goals. Determine how much money you will need to save to purchase whatever it is you want.
- Make a realistic budget. This allows you to see where your money is being spent.
- Pay yourself first. Set aside the money you are saving before you start spending it on other things.
- Keep your receipts. Keep a precise log of what you spend, either in a notebook or on your computer. Unless you keep track of your spending, you will never be a successful saver or maintain a livable budget.
- Put away your credit cards. Use cash for purchases. Avoid debt. If you are already in debt, use all means available to pay it off as quickly as possible.
- Take advantage of IRAs or any other retirement savings plans offered through your employer. Many companies match the amount that you put into your account, so save as much as possible.
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