Save $5,000 in a Year
There are a million or more reasons you can give yourself for not doing something—indeed for not doing anything—to make certain you'll really save some money this time around. You can tell yourself that you'll be just fine without savings, that someone will come along and take care of you. You can tell yourself that there are more important things you need to be doing now. You can push it off until next month or next year. Or you can simply own up to the fact that you need savings and resources to back you up. (And that once you have them, you'll feel a lot safer going to sleep each night and a lot more comfortable waking up each morning.)
The truth is: Saving money doesn't have to be difficult. It only takes $100 a week or $400 to $500 a month to reach your goal of saving $5,000 in a year.
Yes, it's that simple. And yes, you can do it—no matter how strapped you feel trying to make ends meet each month. I know, I know. You're reading this thinking that you can barely get the mortgage paid, sneakers bought, dance lessons signed up for, and (heaven forbid) a manicure or something fun to wear for yourself. I'm convinced, however, that anyone who wants to save more will save more with only a little extra effort. And I don't care if you start with $5, $50 or $100 a week. Whatever the amount, you've got to put your hard-earned cash to work for you in more ways than paying the bills.
- How do you feel about how you're managing your savings today?
- What are some strategies that have helped keep you on track financially? (Jean's take: Personally, I've been a receipt keeper for years. Anyone who's ever caught a glimpse of my wallet will attest to it. I shove every little slip of paper in my wallet until it's ready to explode, then I take a few minutes to type the information into the computer. I use a personal finance software program called Quicken that categorizes all my expenses, so it's easy to see when I'm busting the budget on birthday gifts, eating out or—I admit guiltily—shoes!)
- Do you feel secure in your current financial situation?
- Do you handle your own savings? If not, why?
- Do you want to be richer? (Jean's take: It's okay to admit that you want this. Really! I know that it may feel crass, overly commercial, even unfeminine to acknowledge that money ranks high on your list. But I believe Beyoncé has it right. Having financial security means being able to make the choices you want to make in your life, whether you're choosing schools for your kids, medical care for your parents or freedom from an uncomfortable situation for yourself.)
- What would you do with an extra $5,000 a year?
- What holds you back from saving?
- What about saving money intimidates you?
- What are your long-term money goals?
- When you envision your retirement, what do you dream of doing with your time?
- What are the things that you buy now that you feel are a waste of money?
- What do you pay for that you really don't need or can share the cost with others?
- What's one thing you'd love to save up to buy? (Jean's take: I advocate spending your money on experiences. One thing I've learned over the years is that things—most of them anyway—tend to tarnish over time. But experiences get better with age, especially if you're one of those people who tend to embellish every time you tell the story. As you're saving up for that experience, enjoy the planning, savor the anticipation. Remember, the only thing better than a first kiss are the butterflies in your stomach when you know that first kiss is coming!)
- How much of your money do you find yourself spending on others?
- Were you raised with a spending mentality or a saving mentality? Has that changed as an adult?
- When you spend a large amount of money, how do you feel afterwards?
- What's the most challenging thing about living on a budget?
- If you've failed on a budget, why do you think you weren't successful?
- Where do you think you'll have trouble sticking to a savings plan?
- Who do you think might be able to help you rally through the rough spots?
Task 1: Determine how much you can save each month.
Savers are, in general, happier people. They feel more secure because they not only have enough money to bail themselves out of a jam, but they are also doing something positive for their future. Financial advisers, unfortunately, often draw a random line in the sand and advocate saving 10 percent of whatever it is you make. Problem is, it's much too difficult for most people to start there, particularly if they're saving for the very first time. If the bar is set too high, set it lower. Try 3 percent. If that's easy enough, try 5 percent.
- If you haven't already, track your spending and saving. Write down everything you spend money on for a solid month, using this spending tracker.
What if, as you find all this money, you suddenly feel flush, and instead of saving, you find yourself spending? The key to conquering the urge to splurge is to keep your money out of your hot little hands. Give your bank the power and permission to move some money every month or every payday out of your checking account, where you're likely to spend it, and into savings, where—from now on—you're going to tell yourself it's hands off.
Task 3: Establish direct deposit.
Most employers will automatically deposit your paycheck into the bank account of your choosing. You can even split it between checking and savings! All you need to do is fill out a simple form and you'll avoid long bank lines and paperwork. The bonus: Your money will show up in your account faster than if you had waited for the check to clear.
Task 4: Automate your bill payment.
Just as you can elect to have money funneled into your savings automatically, you can elect to have bills paid automatically by your bank. This system means less check writing, less stamp buying, spending less time schlepping to the bank and—most importantly—fewer late payments that can sabotage your credit score. It makes the most sense to automate the bills that will be for the same amount every month so that you don't come up short: mortgage or rent, student loans (you'll get a deduction on the interest rates by electing auto bill pay), health club, insurance and so forth.
Task 5: Give your savings a bonus.
Every time a little extra money comes your way, earmark all or at least part of it for savings. This is one of the best ways you can give yourself a financial boost.
Where is this extra money going to come from? Here are a few ideas:
- Tax refunds: Deposit refund checks straight into savings. It's found money. Or, better yet, check with your payroll department to see if those refunds are coming because you're withholding more than you need to. If you are, withhold less and put the extra cash from each paycheck into savings so some of that money is earning interest all year.
- Your bonus: You may have been counting on some of your bonus to cover expenses, but be sure to sock a generous percentage of it away into your savings.
- Paid-off credit cards or other loans: Your car is paid off? Fantastic. The $359 (or whatever) you were paying to the car lender should go straight into your savings. A few transactions like this and your savings balance will soar!
- Your next raise: You've already been living on the money you're making now. Pretend you didn't even get a raise, and automatically bank the difference in your savings account.
Download the money tracker and start saving today!
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