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15 simple ways to squeeze your budget

Motivating yourself to save money for unexpected events such as a job loss or a major medical bill is difficult. It is more fun and somehow easier to stash away money for an immediate goal such as a new stereo system, summer vacation or the latest fashions.

But building and maintaining a savings cushion is vital for your financial health. Most financial experts recommend having a minimum of three months' worth of living expenses set aside in case of an emergency.

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If you find it challenging to steal away some cash from your budget to put into a savings account, here are a few ideas. Print out this list of 15 ways to build a healthy savings cushion. Tape it to your refrigerator as a daily reminder that saving is a priority.

  • Focus your spending. Create a budget and track your spending. After seeing where your money goes, it's much easier to decide where you can cut. Then live by it.
  • Treat saving like a bill. Consider your monthly savings amount as a bill that has to be paid. Consider having the amount transferred automatically from your checking account or paycheck. Pay your account every month or every two weeks.
  • Think small. Many people don't think their budget allows room to save, but even a small amount adds up over time. Depending on the size of your family, skipping a meal out each week could result in a $160 per month savings deposit. That's $1,920 a year after taxes! Take a good look at your spending habits, and you probably can find $150 or so each month in extras that you could do without to build up savings.
  • Save your raise. The next time you get a raise at work or a tax refund, consider directing half to savings. If you're not used to the money, you won't miss it.
  • Continue paying. When you pay off a car or other loan, consider making half of the payment to yourself and put it into your emergency savings account. You will not miss the money if it is put into savings, but you will find a way to spend it if it remains in your checking account.
  • Turn off the TV. Don't listen to the advertisements, ''Zero-percent interest. Buy this now!' Ignore sale flyers or mail-order catalogs. The latest sale tempts you to spend money unnecessarily.
  • Think before you charge. Unless you're in the habit of paying your credit card bill in full each month, don't use the cards for anything you can eat or wear.
  • Consider a refinance. Interest rates are exceptionally low. Consider refinancing your mortgage and your car loan.
  • Alternate your commute. If you live in an area that has good public transportation, see if you can get around without the car. Maybe you can get by on one car instead of two.
  • Conserve energy. Do an energy check on the house. Replace cracked storm windows and renew the weather stripping.
  • Read not, waste not. Don't renew subscriptions to magazines or newspapers you're not reading.
  • Java-jolt savings. If you stop at Starbucks or another coffee shop each morning, make coffee at home.
  • Participate in a 401(k) or 403(b) plan. If your employer doesn't offer these plans, then you could start saving in a tax-advantaged IRA or Roth IRA account.
  • Involve the whole family. Even the youngest child can contribute change to the savings goal. It is easier for children to get involved if they understand why they must give up pizza night (or at least cut down the number of toppings!). Also, you are setting a good financial example for your children.
  • Plan a treat for you, your family or both when you reach your emergency savings goal. Make it something everyone will look forward to, but not something very expensive, like a day at the zoo or at the beach. The important thing is to mark the occasion and congratulate yourself and all those who helped!

-- Laura Bruce, Steve Bucci, Don Taylor and Dani M. Arthur contributed to this story.

Bankrate.com's corrections policy
-- Posted: Jan. 15, 2004
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