3. Open CDs
Each time you get paid, open a three- or six-month certificate
of deposit with a portion of your earnings. Check out
CD rates on Bankrate. Savings institutions usually
require a minimum deposit of $1,000, but some accounts
can be opened with only $500. Then renew them each time
they expire. "If you constantly roll these CDs
up (at the end of their terms), then you're constantly
investing," says Stroh. You will likely be ahead
of people who have direct deposit, especially if they
park their money in a regular savings account with a
low interest rate. And since these CDs are short-term,
you can still access your cash in a reasonable amount
of time should you face an emergency. "All you
want to do is make it as hard and unpleasant as possible
to get to your money," says Mandell. But don't
make it impossible.
4. Start low, finish long term
Some people don't save because, after expenses, they feel they can't budget hundreds of dollars a month into a savings account. "But the point is to get started," says Bielagus, even if you start with a very low amount. "If you begin with $25 a month, and then after four months you increase it to $30, and four months after that increase it to $40, pretty soon you're going to be saving some serious money." Keeping a long-term view helps you realize the value of a small start. "You might not be able to predict your income for the next three months," says Stroh, "but you may be able to predict your total income stream for the next several months and years. Your budgeting, spending and saving should be done with that in mind."
5. Go for zero-based budgeting
The flip side of starting small with savings is to start
small with necessary expenses. "Sometimes it's
helpful to adopt an approach of not purchasing more
than is absolutely needed until you've saved up the
money," says Stroh. This method, called "zero-based
budgeting," ensures that the focus is on how big
your savings is each month, not how much you can spend.
For example, instead of giving yourself a monthly clothing
allowance, you may choose not to spend money on clothes
at all for several months. Then, on a few occasions,
you would tap into your savings to make clothing purchases.
"It's more a matter of how much extra savings can
be built up, and then using that savings toward a planned
seasonal purchase," says Stroh. Sure, you are going
to have a specific set of expenses each month such as
rent or mortgage and food, but for discretionary purchases,
practice saying "no" as you watch your savings
6. Get real with your goals
You can't know if you're saving enough unless you determine in advance how much you want to put away, and that means setting targets. "When I go to bed, I have a legal pad next to me that lists my savings goals," says Bill Warren, a Realtor in Richmond, Va. "I'm constantly reviewing them." If you are not sure how much you should be saving, take a quick look at your last bank statement. Which types of businesses received the most of your money? How much did you spend with those businesses? Make that dollar amount your new monthly savings goal. You are more important than the services those companies provide.