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So another year is almost over and you haven’t started saving money?
You have a lot of company.
In October, the U.S. Commerce Department reported that Americans are saving less and spending more. The savings rate fell to a 10-year low of 3.1 percent in September, making it the seventh month in a row that the American savings rate was less than 4 percent. Most experts say to save at least 10 percent; there is also a commonly held formula of 50/20/30: allot 50 percent for necessities; 20 percent for savings; 30 percent for discretionary items.
Economists theorize that low unemployment, a booming stock market and household optimism is driving the trend. But we all know that tighter times follow boom times, so committing to a savings plan now is a smart move for the new year.
What you need is a simple, nearly effortless way to get in the savings habit. Remember, it’s more important to develop the habit and over time it will pay off, says Kathleen Perko, regional manager for PNC’s Charlotte, N.C., market. The trick is building the habit into your lifestyle.
“Certainly, there are a lot of creative ideas out there,” she says. “Try on a few then pick one that works for you.”
In that spirit, here are some tips and tricks to get you started:
Automatic transfer. If you’re serious about savings, manage your money so you don’t have the opportunity to spend frivolously. Take advantage of online tools to automatically move money into a savings account each week or each pay day. “You’re paying yourself first,” Perko says.
Envelope system. Not tech savvy? Use the tried-and-true envelope method. This one has been around for ages, and works very well, especially for “visual learners,” she says.
Designate envelopes for expenses such as rent, groceries and incidentals. Place cash in each envelope once or twice a month, depending on how often you are paid. When the money’s gone, so is your cash for the month for that expense.
“It will make you think more about spending money,” she says.
24-hour rule. If you want to buy an item that you don’t need, put it on hold for 24 hours. If you decide not to buy it, put a portion of what you would have spent in savings.
Weekly challenge. The first week of January, put $1 in savings. The second week, add $2. By the end of the year, you will have saved $1,378. If it’s easier, put in $52 the first week, followed by $51, so you’re not saving the most at a time when many people incur extra holiday expenses.
Extra change. Put your coins in a jar at the end of the day. If you save $8 a month, that’s almost $100 each year.
Save bills. Just like saving your extra coins, you can decide to save every $1, $5 or $20 bill from your wallet.
Paid off your car? Keep putting the amount of the car payment in savings. You won’t miss it, right? Even better: automate it so you’re not tempted to spend.
Extra bucks. Save your cash rewards from your credit cards. Just move the rewards right into savings. Again, you won’t miss what you haven’t been spending.
Got a big refund or bonus? Save it. Keep 10% for your mad money and spend it on anything you want. That way, you won’t feel deprived but you won’t blow the windfall, either.
Here’s a final tip. For many people, having a specific goal helps motivate them to save. Perko says it makes saving more fun to save for a specific goal, such as a vacation. It’s important to build up an emergency fund that will cover six months of expenses, but after that you can save for your “wants” not your “needs.”
The point is to develop savings as a habit rather than something you have to think about. It does get easier in time, she says. Save something from every paycheck “even if it’s a couple of dollars. It’s the best way to get started.”
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