This was originally published on Monday, April 13, 2015, in the Pacific Daily News. Click here to subscribe to the PDN.
Question: I want to start contributing more to my savings account, but by the end of the month I do not have enough to put into my account. I created a budget and I usually break even every month. Do you have any ideas that could help me start saving?
Answer: Today’s cost living is much higher than when our parents were our age. Not only has the cost of living increased but the growth of wages has not grown in proportion. It is difficult to save what you want when you are responsible for bills, loans, food, and shelter. We have to decide where our money goes and most of the time that means we neglect adding money into our savings account.
According to a survey on Bankrate.com more than a quarter of Americans do not have a savings account. Some experts say that you should have at least six months’ worth of income saved up in case of an emergency. That same survey states that less than twenty-five percent of Americans save that much.
Saving money is not only a choice but a change in lifestyle. Many of us say that we have good spending habits. To be certain, track where every dollar goes. You will be surprised how much money is spent on nonessential items. A dollar spent on a bottle of water every day is roughly $30 a month or $365 a year!
Today’s technology makes it easier than ever to track your spending. There are smartphone apps that can help you track your money. It will not do it automatically, so you will have to program yourself to enter the information. It is best to do it just after the purchase so you don’t forget later. Once you get started it will become quite addictive to watch how your money is spent or in some cases not spent.
Most people think that they should deposit into their saving account once all their bills and necessities are paid. In actuality, you should pay yourself first. Depositing your money into your savings account first will cause you to become smarter and wiser on spending the remaining amount. The hard part is not withdrawing the money once you deposit it. Make it difficult to withdraw from the account. Do not carry the debit card associated with that account. Leave it at home and use it for real emergencies. Open the account in another bank from your primary account. This will remove the temptation to transfer funds from the savings account.
This process is a lifestyle change and there are many different ways to save. Here are few to start.
- Save your loose change. Putting aside a dollar a day adds up. Deposit your loose change monthly into your savings account.
- Stay away from impulsive buying. Take an hour or so to think about smaller purchases. Take a day or two on more expensive purchases.
- Sales are wonderful and a great way to save if you need the item. If you want to buy something simply because it is a great deal then you really do not need it. Be careful with the “buy one get one (discount) off.” Unless you need two of the same item, it is not worth spending more money.
- Shop at thrift stores. You would be surprised that many of the items donated are in good condition. Kids’ toys and clothing are always a great find especially since kids rarely stay in the same size clothing for very long.
- Ask your doctor to prescribe a generic version of your medications. Generic versions do the exact same thing, just cost less.
- Store brand over-the-counter medications work just as efficiently but do not cost as much.
- Use automatic teller machines (ATM) that do not charge you to use them. Some stores will allow you to get cash back at the register if you use a debit card.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.