The secret of successful savings borrows from the tale of the tortoise and the hare: slow and steady wins the race.
But while it may be a winning strategy, it’s difficult to get motivated when your savings balance is climbing that slowly. One way to keep your head in the game: Sock away some extra — especially in the beginning — so you can get enthused watching that balance really climb.
1. Set a clear goal. Are you putting money away for a rainy day, a new car or retirement? Break the concept into two categories, says Dave Ramsey, author of ”
The Total Money Makeover.” “Investing is five years or longer. Savings is five years or less.” The critical difference: “When you’re saving, it’s not going to be the power of compounding interest that helps you save,” he says. “You’re the big thing — the money you put in.” That means you have to have a goal and keep yourself motivated.
2. Use a jar. Put a quart-sized jar in plain view and dump all your change in it every day from purses or pockets. When it’s full, take it to the bank or grocery store change machine and put those funds into savings. “You can collect $50 to $100 in no time with this strategy,” says Joline Godfrey, author of ”
Raising Financially Fit Kids.” And it’s a little less painful than trying to do without something you love.”
3. Buy generic. Don’t skip buying hair conditioner or that special body wash, but check out the store’s version of the same product. Many times the formulas use the same or similar ingredients for prices 25 percent to 60 percent less. Do it for a month, and bank the savings. It’s a nice way to pull extra money out of what looked like an empty pocket.
4. Do it yourself. David Bach, author of ”
The Automatic Millionaire Workbook,” calls this your “latte factor.” Find something you can live without (or do yourself inexpensively), and put what you would have spent in your savings. Make it a temporary arrangement, just to kick off your savings program. Knowing you don’t have to stick with it forever should make it a little easier. Look at what might be eating your spare dollars. Vending machine sodas and snacks? Morning caffeine fix? Admit you’re going to still have the craving, but stock up at a discount store and supply your own drinks or munchies, then put the cash you didn’t spend into savings.
5. Plan a garage sale. OK, in this day and age, your “garage” could be on eBay. The point is, if you have goodies you haven’t used in a couple of years or more, cut your losses and put them up for sale, then bank the results. Need help getting motivated? “Partner with a friend to get it done,” says Godfrey.
6. Pick up a pen. Write down what you spend. “It’s the dreaded ‘B’ word,” says Ramsey. Budget. “When you write down where the money is going, it has immense power,” he says. Most people fight the money-saving-spending war “down in the trenches,” he says. But writing down where you spend your bucks will give you “the 30,000-foot view.”
7. Cut your overhead. This the “double latte factor,” Bach says. “Almost every bill you have, you can get it lowered.” Here’s how: Think of certain monthly bills as fixed expenses — phone, cable, cellular bill, Internet service, etc. But they’re not as immutable as you think. Go through each one and find the fat. “The average person pays $80 for cable when you can get a cable package available for $19.95,” Bach says. “See if you can cut back or get a better deal.” Are you using all of your cell minutes? If not, how about a cheaper plan? On long distance, do you need the plan you’re using or would a cheaper version (or one with another carrier) net you a nice savings? Carrying a credit card balance? Call to find out if you can get the interest rate lowered, then tally up the money you’ve saved and arrange for an automatic deposit to your savings account of the same amount. For one couple Bach worked with, the answer was car pooling. The wife was a teacher, so finding a car-pool partner on the same work schedule was possible. “Instead of filling up the car every week, they’re filling it up every two weeks,” says Bach. As a result, there is an extra $50 to $100 every month going into their savings account.
8. Tax yourself. Every time you buy a nonessential, put 10 percent of the purchase price in an envelope, says Godfrey. At the end of the month, the contents go into savings. “It makes your purchases more expensive, but at least you’re putting some money in the right place,” she says.
9. Make saving a family priority. Get kids in the habit of saving, too. One good way is to make it a rule that one-third of all income — whether it’s allowance, eanings or gifts from grandparents — goes immediately into savings, says Godfrey. Another of her favorites: Add some sort of matching component to the child’s savings efforts. But no more than dollar for dollar, she says. “Because if you make the match too generous, it gives the impression that saving is too easy.”
10. Automate as much as you can. Sit down in the beginning and determine just how much you want to put away every month. Once you’ve cut back on bills and expenses, have that money automatically deducted from your paycheck or arrange for an automatic draft from your checking account into your savings. That way, you have a baseline amount you’re racking up every month without even thinking about it. And more important, if you don’t see the money, you’re less likely to spend it. Says Bach, “Save it automatically and leave it there.”
11. Do something regularly to remind yourself why you’re saving. Whether it’s a bulletin board with photos of your dream house or a “new car smell” air freshener hanging from the rear view mirror, put your goal front and center in your life. “There is no silver bullet, no little trick,” says Ramsey. It’s a matter of changing your focus, he says. “It has to become an emotional priority.”
Dana Dratch is a freelance writer based in Atlanta.
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