Here are a few tips to help you reach your savings goals:
•Replace your things only when you need to replace them.
It’s tempting to replace your phone, your television, or any other items as soon as a new version is released. But if you’re trying to save, it’s counterproductive to buy something new when the old product works just fine. Get as much use out of your purchases as you can, and put away what you’ve saved so you can reach your goals.
•Cook your own food. Buying lunch, dinner, drinks, and coffee on the run can add up over the month. If you’re spending a significant portion of your income on dining out, it may be time to learn how to cook. You’ll become more self-sufficient, hone a few skills, and put away more money for your bigger dreams in life.
•Track your progress. You’re working hard to save, and you should see that progress. You’ll feel good about yourself, and you’ll be motivated to k eep up your behavior. Take out your monthly statements, and total your spending. Compare those figures to previous months. If your new habits are having an effect, you’ll see it in the numbers.
•Ask your employer to deposit a portion of your paycheck directly into your savings account. You won’t spend it if you don’t see it. If you are enrolled in a Direct Deposit program with your employer, ask if you can split your earnings between your savings and checking accounts. With this arrangement, you can’t be tempted to skip saving for the month. If your employer doesn’t offer this option, arrange for automatic deposits between your accounts.
•Treat your savings as a bill you pay each month. You don’t want any more bills. But if your savings goal is as important to you as your c ell phone bill, it doesn’t hurt to pretend.
Pay your savings account when you pay your bills, and by the end of the year, you can be proud of what you’ve put away.
•Ignore windfalls, raises, and other increases to your income. It’s great that you have good news. Now, pretend you didn’t hear it. A windfall can lead you to change your lifestyle: you start spending more because you have more. This doesn’t help your savings: in fact, it can hurt your savings, if your new habits outpace your new earnings. Put your new income away, and continue living with the lifestyle you’ve gotten used to: you’ll reach your savings goals faster than you planned.
•Use college savings and investment accounts. If you’re saving money for your child’s college education, you can place savings in accounts specifically intended for college funds. Coverdell Educational Savings Accounts and 529 college savings plans provide you with multiple investment options, and your earnings are tax-free as long as the funds are used for college expenses. You can also look into college savings reward programs like Upromise. com, which offer you cash back for college if you shop through their partners.
•Shop for savings accounts with good interest rates. If you don’t already have a savings account, it’s time to go shopping: check with financial institutions on their rates for savings accounts, money market funds, CDs, and other savings vehicles. If you can meet the minimums, and if you can put money away for a long period, opt for accounts with higher yields. You’ll earn more in interest, and you’ll be even closer to reaching your savings goals.
Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.