Let’s face it, for most of us one of the biggest obstacles to saving is that sometimes there isn’t enough paycheck at the end of the month. Even for those of us who educate people about managing their finances, it can get hard when the budget is already stretched thin. Here are a few ways to get you started.
Put Savings on Autopilot
A good way to jump-start your savings is to pay yourself first. Do this and you will soon realize how a little goes a long way. Look at yourself as a bill. When you get paid, decide how much you will save - let's say $50 each pay check. Make it automatic by setting up an electronic transfer from your checking account to a savings vehicle such as a basic savings account or an IRA or individual development account (IDA). This way you won't have to think about making the regular deposits because they'll happen automatically. You will quickly notice how fast your money will grow. For your 401(k) retirement savings plan, try to contribute at least enough to get the company match.
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Create a Spending and Savings Plan
Do you know how much you spend? Most of us don’t realize how much we spend each month, let alone each week. The best way to assess this is to write down all your expenses. This will give you a snapshot of where your money goes. Create a budget so you can track how much is going out against how much is coming in. You will probably find areas where you can save. Instead of buying five lattes a week, for instance, you can reduce to three and put that extra $20 into savings.
Use Credit Cards Efficiently, if at All
Now that you have your savings on autopilot, focus on clearing up unwanted debt. If you have multiple cards, with low balances, pay those down quickly so you use that money to pay off cards with higher balances. For credit cards with high interest, call the company to see if it will lower your rate. For new credit cards, apply for those with cash rewards; put money earned in your savings or use it to pay off another card.
Take a money challenge. Save an amount for the corresponding week (week 1: $1.00; week 2: $2.00), and continue it let’s say for 52 weeks. You will have saved $1,378 that can be put away. Try it with friends and continue throughout the year and see who last the longest.
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Decide today to take steps toward financial freedom. Visit www.aarp.org/financialfreedom to learn more about AARP’s Financial Freedom, online tools and resources, and tip sheets to help you get started.
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