Key Secrets To Saving

The basic rule of thumb about any and all income is to always make contributions to your savings and investments accounts first. Only after paying at least 10% into personal savings should the remainder be available for spending or giving. Save additional amounts if possible. Very few people that are retired claim that they have saved too much money. On the contrary, most people wish they had saved more. Another important secret to saving and investing is having the money automatically withdrawn from your paycheck and/or a financial institution account. You will not miss the money that you do not see. Let your money work hard for you instead of you having to work hard for your money!

Create An Effective Spending Plan

A spending plan should be set up for all the money you receive each month. Make sure to create spending categories representing the uniqueness of your own life. Identify the amount of money allocated to each spending category. Allocate funds to savings and investing categories first and then to other spending categories. Discuss the spending plan with all family members so that everyone is aware of what items are in the plan and what things are not. Continually review and follow your spending plan. Studies continually report that savers who have a comprehensive spending plan report saving about twice as much as those without plans!

Avoid Common Spending Traps

The key to a successful spending plan is to avoid six common spending traps.

Spending Trap #1: Not Knowing Where The Money is Going
Many financial planners agree most consumers cannot account for up to half of their money spent monthly. The best way to keep track of where your money is going is to set up a spending plan on paper or utilize a financial software package.

Spending Trap #2: Spending First, Saving Anything Leftover
Generally, not much money tends to be left after paying bills. However, a large part of spending includes controllable variable expenses. If amounts are set aside first for saving and investing, the leftover amount becomes what is available for variable expenses. This will allow you to save and invest while also covering necessary expenses.

Spending Trap #3: Buying Short Term Luxuries vs. Saving for Future Financial Goals
Many people would rather enjoy a luxury vehicle, nice vacation, new clothes, or computer gadgets today. Long-term financial plans may be jeopardized. Instead, balance instant gratification with important financial obligations and goals. Four important financial goals that take time to accomplish due to the amount of money needed are:

• Paying off debts
• Saving for retirement
• Buying a home
• Saving for children's college

Spending Trap #4: Buying Unnecessary Things
Many items are purchased that are never used or the full benefit and value is not received from them. Spend some time evaluating purchase decisions to make sure they are prudent.

Spending Trap #5: Spending Money Not Yet Earned
Money spent but not yet earned generally means either:
(1) The purchase was bought with credit; or (2) Money earmarked for other things was spent. Ask yourself, .What do I have to give up tomorrow to have this item today?.

Spending Trap #6: Failing to Plan in Advance
Recognize that every month will include some seasonal, unusual, or unexpected expenses. Examples include property taxes, income taxes, holiday gifts, vacation, new car, down payment on a new house, insurance premiums, home improvements, car repairs, and maternity expenses. Build a cash reserve fund to cover these expenses. Authorize your financial institution to deduct a small amount from your checking account every month and place it in a money market account. Consider keeping three to six months of living expenses in a safe, easily accessible account, such as a money market account.