Saving

Save More in 2012 the Easy Way

There is no reliable way to predict the future so when emergencies and other unexpected events occur having some money set aside is very important.  Besides, being prepared for the unexpected savings are also helpful when making large purchases like a new car or house.  For some people, saving money is second nature and they are not tempted to blow their savings on things they do not need. Not everyone is that disciplined so here are a few ways you can save more in the coming year.

Pay Off your Debt

This one is kind of obvious. If you don’t have to give your money to bill collectors and keep it for yourself, your wants and your needs, then you have to be diligent about paying off all of your debts. Even a small credit card bill of $100 per month can make a big difference in the amount you are able to save.  Once you are able to pay off a debt pay the same amount you would have paid on the bill to your savings account. Read the next section for more information on how to do this.

Tips

  • Set up a budget and abide by it.
  • Live within your means.
  • Try the envelope system if you need to a tangible guide.
  • Download an app (ie., Mint.com  Free App ) or computer program (ie., QuickBooks or Mint.com) that will help you keep track of your spending.

Use Bill Pay

It can be hard to remember to put away savings each month; in my case, instead of saving my excess money I would splurge on food or clothes I automatically add those savings to my savings account. To make sure you actually save something each month, I recommend using a bill pay service at your bank to automatically move a set amount of money to your savings account each month.  I have a savings account with a credit union that gets better interest than my checking account so each month a set amount is sent to that savings account using bill pay.

Treating savings like a bill can help you take it more seriously and make it part of your budget.

Tips

  • Start off with a small amount like $50 per month. As you get used to not having this extra money adjust your budget and increase the amount as needed. Even a small amount like $50 per month will add up over time.
  • Use a different bank.  As I mentioned above, I am keeping my savings in a credit union.  There are 2 reasons for this, better interest rates and because the money is not in my checking account it is harder to access and therefore I am less likely to spend it on an impulsive purchase.

Save your tax return

Every year starting in January you will start to see many businesses offering tax return specials. Some of the offers can be very appealing and when you are expecting a sizable return it can be tempting to blow some of it on something you have been wanting.

However, why not just put most of it in savings?  If you are on a budget you should already have money to cover all your regular expenses so your tax return is just extra. By putting a lump sum into savings you can set aside less for savings each month.  For example, instead of having to budget $450 per month for savings you could save less each month knowing that when you receive your tax return you would be depositing most of it into savings.
Also, if you have used any money in your emergency fund during the year this is a great way to replenish it.

Tips

  • Once you know how much your return will be, decide how much of it you need to save to meet your savings goals. You don’t have to save all of it, its fine to treat yourself within reason.
  • I recommend using some of the money to pay at least one extra payment on your mortgage, which is possibly a tax right off the next time you have to file, if the money goes onto the accumulated interest.
  • Keep track of your budget during the year so you will not need to depend on your tax return to catch up bills and other responsibilities.
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