7 small steps to big savings

2. Use bigger bills to think big 
D'Angelo's next trick for facilitating the mental shift requires a quick trip to the bank. Get a $100 bill and keep it in your wallet with your other money. When your smaller bills dwindle to nothing, take a moment and say: "I'm down to my last hundred." When you finally need to break and spend it, it feels better than getting down to your last buck. It's about resetting your mental focus.

3. Start saving on autopilot 
Some people won't do anything for themselves, but will focus on their children. If this is you, start by setting up a 529 plan for college savings. At the same time arrange to contribute to your company 401(k) plan. No, that's not emergency savings, but it still will help change your focus and build wealth. Plus you won't feel the pinch of 401(k) money because you're saving pretax dollars.

Once that's rolling smoothly, figure out how you can maximize your 401(k) contributions. For example, if you receive a tax refund every year, adjust your withholding and put that extra money in your 401(k) plan so that you, rather than Uncle Sam, can earn dividends and income on your money.

The truth is, if need be you can tap 401(k) money in an emergency. Tuck money away here before putting it in a traditional passbook savings account. Because it's not as liquid as a bank account, you won't be as tempted to touch it.

4. Open a brokerage account 
Here's where D'Angelo's approach really diverges from the norm: Open an account at a discount brokerage firm, then go to your employer and have a portion of your pay directed to that account. Start with a money market mutual fund. When you get together the first $1,000, purchase a no-load stock mutual fund, such as one that mimics the Standard & Poor's 500.

Planners are taught to instruct people to first accumulate money in an emergency fund and then invest, says D'Angelo. But often the emergency fund never gets started or simply doesn't grow because it's too accessible. "People without emergency funds tend to live in debt and paycheck to paycheck. You've got to initiate change somewhere."


Why not set up your emergency fund in a brokerage account, which offers tons of investment options, instead of a bank where interest earnings generate yawns rather than excitement?

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