One of the most important factors in preparing for retirement, purchasing a home or buying anything of importance is the ability to save money. While saving money is as simple as tucking away a few bucks each week from a paycheck, for millions of Americans it can be extremely difficult and require lots of discipline. Saving money is one of the most important skills to learn. While easy in theory, it does require a long term plan of action and some education. Here are some tips on how to save.
How Much to Save
One of the hallmarks of effectively saving money is to make sure to put money into savings first. Whether it is $10, $100 or even $1,000, before paying anyone, make sure to put aside money to put into a savings or checking account. Determine a realistic amount to save each paycheck and take that money out before paying anyone else. A realistic amount can be 5%, 10% or 20%, whatever the amount, it will add up in the long term. After a period of time, up the amount you are saving by another 5% and continue this way every week or month. It will be easier to save when increasing savings by small amounts.
How to Save on a Personal Budget
Most people don’t recall half of the stuff they bought the previous week. Enormous amounts of money are wasted each month on purchases that truly have little value. Sure that coffee tastes good or that CD sounds cool, but when viewed collectively, thousands of dollars are wasted each year on goods that are of little use except to serve the desire for gratuitous impulse shopping. Cutting back 10 to 20% of impulse purchases should save hundreds to thousands of dollars per year.
How to Invest Savings
It’s great to save money, but investing can help that money earn more. Saving money and hiding it in a mattress will not be participating in the most important aspect of savings- investing money so that it can earn more. Using compound interest, $1,000 per year over 30 years at 10% interest can return a whopping 200K. Don’t just save money, invest it and make it earn more.
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