Areavoices: A few practical tips for saving money

• Real Money / Areavoices.com

Real Money / Areavoices.com

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Living without a savings account is tantamount to a trapeze artist flying without a safety net. A recent financial literacy survey reveals almost two-thirds of participants admit to not tracking their spending. Spending with abandon, combined with little, if any, regard for savings is a recipe for financial disaster. Financial counselors at The Village suggest these money-saving tips:

• Track your expenses: To find money available for savings, first determine where you are spending your money. You can’t know where you’re going until you know where you are. Tracking expenses will provide the answers. Write down every cent you spend on the Expense Tracker (free at www.HelpWithMoney.org). At the end of the month, take a look at where your hard-earned cash really goes.

• Create a budget: A well-designed spending plan considers all sources of income, living expenses, debt obligations and savings. Be sure to incorporate all three expense categories: fixed expenses (e.g., mortgage, auto loans, and rent), variable expenses (e.g., credit cards, groceries, entertainment and gasoline), and periodic expenses (e.g., property taxes, home repair, clothes and car maintenance). Whether it’s saving for retirement, education, or a vacation, the old adage remains true: pay yourself first. You can’t spend money you don’t have, so set aside your allotted savings right off the top. Go to www.HelpWithMoney.org for a free spending plan.

• Customize your budget to fit your lifestyle: When constructing your budget, be realistic when looking for opportunities to save money. People are more successful when they cut back as opposed to cutting out. Don’t be too strict, or you won’t stick with your plan. Know, however, that small changes over time can indeed add up. For instance, instead of eating lunch out every day, brown-bag it two days per week. Take a look at your cable package and cellphone plan to determine if you have the right fit for your lifestyle. Savings opportunities are available in each spending category.

• Involve the entire family: A joint effort yields a greater result. Make it fun. See who can save the most each month, and have a special prize for them. Agree upon a savings goal that everyone can work toward (summer vacation, new car, etc.). Celebrate each success along the way.

• Find the right savings vehicle(s) for you: There are many ways to optimize your savings. Consider splitting money between accounts that are liquid (such as money-market accounts) versus those intended for more long-term savings (such as certificates of deposit). Explore liquid money market accounts online, as these accounts can offer higher interest rates. Know that sometimes, easy access to saved money is needed for emergencies, so don’t put all of your savings into vehicles where you’d be penalized for withdrawal.

• Pretend it never happened: When you get a raise, birthday money, bonus, or tax refund, quickly put this extra income toward your retirement plan or savings account. The longer the extra money is in your possession, the easier it is to spend it. If you were anticipating using this extra money to buy something special, instead, consider using the money to pay down credit card debt, give yourself a small treat, and deposit what’s left over into your rainy-day fund.

RealMoney is a featured blog of the Areavoices online community, part of Forum Communications Co., which owns the Herald. It’s provided by The Village Family Service Center.

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