Top 10 Savings Tips

1. Start Today

Time is the scarcest resource we have. We all know that the better we manage our time the more productive we become. This time management principle holds true in savings because time is the largest variable in growing your savings. In fact a person that starts saving a much smaller sum of money at twenty would still end up with more than someone who begins saving twice as much at thirty five. Garth Brooks says it best when he says, “Why put off till tomorrow what can be done today.”

2. Pay Yourself First

Pay yourself first is the key to saving money. Pay yourself first creates an environment where you live below your means. Every time you pay yourself first you create more security for you and your loved ones. If you haven’t been using pay yourself first as a payment strategy, try it the results you will see will astound you.

3. Pay down all your high interest debt

Carrying debt balances that charge a high interest rate make can be the largest obstacle to wealth creation. Examine all the debts you have especially focus on credit cards and automotive debt here, and if you pay more in interest than you earn in your savings earns then pay it off. Start by focusing on the smaller balances and paying the minimum payments on the other loans. After paying off the first balance you will have a sense of accomplishment. After the first balance begin to focus what you were paying on the previous debt towards the next biggest debt. This continues on making each debt easier to pay off than the last. Dave Ramsey coined the term, “Snowball Effect” to explain how this debt payment strategy works. Really the only debt that you should carry at the end of this is a home mortgage, and maybe student loans. I’m not saying don’t save before you are debt free, in fact I want you to start saving before you are debt free. So that when you are debt free you already have a savings system in place for yourself. Also keep in mind that not all debt is bad debt. Not all debt is bad debt, the mortgage helped you buy a home, and maybe fund your education.

4. Build An Emergency Fund

An emergency fund is your first line of defense against unexpected expenses. Often times unexpected expenses are the beginning of the debt cycle. Unfortunately most of us don’t have adequate savings for a rainy day. Forrest Gump may have said it best when he said, “It happens.”, and when it does you need to be prepared for it. To set up your emergency fund, first go to your budget and estimate what six to twelve months of expenses. This is what you should hold in your emergency fund.  A savings account works best here. If you need to use the fund replenish it with your pay yourself first money. Once you have six to twelve months expenses in your emergency fund you can leave it alone and focus on some different kinds of savings.

5. Get your Employee match for your 401k

This week at work go get information about your employer’s 401k plan, and do the paperwork. If you have your 401k set up be sure to contribute for the employer match, the same goes those of you just opening their 401k. The number one reason I am fond of the 401k is the employer match. The employer match great is because free money is given to you just for saving. In reality, it also boosts your returns by whatever the match is. For instance your employer offers to match 5%, well that gives you an automatic five percent return on your money, in fact is so easy it’s hard to give up. It doesn’t hurt either when your 401k contribution reduces your tax bill.
You can get the last five tips along with other savings and financial advice here.