Take the sting out of saving
Sometimes small extravagances, like the proverbial cup of coffee, are all the cash-strapped feel they have left. Do you have any suggestions to make saving seem like less of a sacrifice or punishment?
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I've never considered it a punishment, but rather I see it as empowering. I think there's something very liberating about the fact you have savings, not just retirement, but also for emergencies. Then if something happens where you lose your job, you don't have to take the first one that is offered. It gives you flexibility. It gave me time to take off with my first child. There's a learning curve that comes with the first kid, and it's the emergency fund that allowed me to spend extra time at home.
I was telling a woman who knew she was about to be laid off that she could still go out to dinner, but maybe only twice a month. She said, "Only twice a month?" and that surprised me. You may be used to going out all the time but realize that there are some apects in your budget that you may have to cut back on.
Slowly start to build your savings back up if you deplete it. For those living paycheck to paycheck, this might be hard, and if you have $25 left at end of the month it might not seem like much (and it isn't if it's just sitting there), but if you invest it rather than leaving it in the account, it will add up. Go to Bankrate, look for high percentage yield options. I cite Bankrate all the time -- full disclosure. I really don't know any sites that lay out high yield savings accounts the way it does.
Digging out from under debt
For someone buried under credit card debt, do they still need to be saving? How do you suggest someone prioritize savings while paying off credit card debt?
It is very tough to think about saving when you're in credit card debt. Yes, you do need to pay off the debt because it is often at a higher interest than you'd get on your savings, but you don't want to completely disregard the savings account. If you're in an either-or situation, you're going to be hard-pressed to find an investment that will generate 15-18 percent interest, so you might want to put some of your money toward high-priced debt.
Whatever money you're using to pay off debt, once it is wiped out, continue to pay, but to yourself. Pay yourself. Put it in your emergency fund. And slowly pay off other debt as well. Look at interest rates, but if there's any way you can do both, prioritize saving, too. Do things like fully funding your 401(k), so that you don't leave free money on the table.