Saving money is easy when you know how

Saving regularly is not a habit that comes naturally to a large proportion of the population. Far too many people have expenditure habits that regularly increase to match (and unfortunately sometimes exceed) their income. Making a conscious decision to start saving regularly, therefore necessitates cuts in other areas of their expenditure. That said, beginning a savings plan early, however modest, is always better than not saving at all.
Most of us too, have areas of expenditure that can be easily cut, or reduced, without materially affecting the overall quality of life we live.  These include
- reducing the number of times we go out to eat … home cooking is generally a cheaper option
- reducing the amount of expensive coffee and snacks we consume … packed lunches are a cheaper alternative
- quitting smoking … tobacco taxes mean smoking is a very expensive habit
- renting movies instead of going to the cinema … this is true especially when you factor in the price of snacks at most theatres
- keeping an ageing car for a year or so longer than usual … will not normally be more expensive to maintain, but since cars depreciate the most when they are new, the savings can be significant.
Getting into the habit of saving is hard. There are always bills to pay, things to buy, expenditures to make, with saving trailing the priority list. One way to ensure regular saving, is to make saving a priority. By setting aside the amount to be saved, before *all* the other spend, it is much easier to get into the habit of saving. And once you adjust your spend to match your income *net* of all savings, you soon train your mind to not view the saving as onerous, but as something as unavoidable as taxes.
Putting the money in a savings account first, or writing the check to the mutual fund first, also ensures that you resist the temptation to miss a month or two when you feel things are particularly hard. Cutting your monthly expenditure because you have run out of money after putting some aside in savings is a much better long term financial position than skipping a single investment plan ‘payment’.
In addition to this, most people work for employers that offer special savings and investment programmes. Examples include the popular 401(k) plan, which simplify this act of deducting savings before all other expenditure so much easier. Automatic deductions from your pay, and direct payment into the investment fund of your choice tend to be offered as standard. There are a lot of tax benefits that are often realizable from participating in such savings plans. In some cases, employers will also contribute extra money through these plans, often matching any contributions your make.
Another way of freeing up more of your income for any savings and investments, is to reduce or eliminate your credit card debt. The vast majority of adults in the US today, has more than one credit card. In many cases, these cards, are regularly ‘mazed’ out, while only the minimal payment is made every month. The problem is that with rates often greater than 20% per annum, credit card debt is often the most expensive form of credit. It is much better to reduce the level of this debt, and to pay off the full amount every month, than it is carry on mortgaging your future income, at such exorbitant rates, to fund (often) unnecessary purchases today.
In short, the sooner you begin a savings plan, the better off you will be financially. Sticking to a savings or investment plan is much easier when this money is set aside before all other expenditure. There are many areas of expenditure that most people can cut out, or reduce, without adversely affecting their quality of life, including eliminating the very expensive credit card debt that is so prevalent today.

Saving regularly is not a habit that comes naturally to a large proportion of the population. Far too many people have expenditure habits that regularly increase to match (and unfortunately sometimes exceed) their income. Making a conscious decision to start saving regularly, therefore necessitates cuts in other areas of their expenditure. That said, beginning a savings plan early, however modest, is always better than not saving at all.
Most of us too, have areas of expenditure that can be easily cut, or reduced, without materially affecting the overall quality of life we live.  These include- reducing the number of times we go out to eat … home cooking is generally a cheaper option- reducing the amount of expensive coffee and snacks we consume … packed lunches are a cheaper alternative- quitting smoking … tobacco taxes mean smoking is a very expensive habit- renting movies instead of going to the cinema … this is true especially when you factor in the price of snacks at most theatres- keeping an ageing car for a year or so longer than usual … will not normally be more expensive to maintain, but since cars depreciate the most when they are new, the savings can be significant.
Getting into the habit of saving is hard. There are always bills to pay, things to buy, expenditures to make, with saving trailing the priority list. One way to ensure regular saving, is to make saving a priority. By setting aside the amount to be saved, before *all* the other spend, it is much easier to get into the habit of saving. And once you adjust your spend to match your income *net* of all savings, you soon train your mind to not view the saving as onerous, but as something as unavoidable as taxes.
Putting the money in a savings account first, or writing the check to the mutual fund first, also ensures that you resist the temptation to miss a month or two when you feel things are particularly hard. Cutting your monthly expenditure because you have run out of money after putting some aside in savings is a much better long term financial position than skipping a single investment plan ‘payment’.
In addition to this, most people work for employers that offer special savings and investment programmes. Examples include the popular 401(k) plan, which simplify this act of deducting savings before all other expenditure so much easier. Automatic deductions from your pay, and direct payment into the investment fund of your choice tend to be offered as standard. There are a lot of tax benefits that are often realizable from participating in such savings plans. In some cases, employers will also contribute extra money through these plans, often matching any contributions your make.
Another way of freeing up more of your income for any savings and investments, is to reduce or eliminate your credit card debt. The vast majority of adults in the US today, has more than one credit card. In many cases, these cards, are regularly ‘mazed’ out, while only the minimal payment is made every month. The problem is that with rates often greater than 20% per annum, credit card debt is often the most expensive form of credit. It is much better to reduce the level of this debt, and to pay off the full amount every month, than it is carry on mortgaging your future income, at such exorbitant rates, to fund (often) unnecessary purchases today.
In short, the sooner you begin a savings plan, the better off you will be financially. Sticking to a savings or investment plan is much easier when this money is set aside before all other expenditure. There are many areas of expenditure that most people can cut out, or reduce, without adversely affecting their quality of life, including eliminating the very expensive credit card debt that is so prevalent today.

Pages