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Like To Save, But Don't Know How?

Overall in 2010, we Americans are saving more money. That's one positive thing, at least, that the recession has prompted us to do. According to the latest figures from the U.S. Bureau of Economic Analysis, the savings rate is over 3% (as a percentage of disposable income). A few years ago our relative savings rate was essentially zero. So this is a great trend—a positive for personal finances that I hope everyone will continue to do even after the economy recovers.

Getting in the habit of saving regularly, however, is not easy for most people. There are so many temptations to spend. It's a little like resolving to eat in more healthful ways—you do great for a couple of days until a co-worker brings in delicious sweet treats for the break room. Nevertheless, you are determined to start saving and build up at least the recommended emergency fund equivalent to six months' living expenses. A worthy goal.

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In this report, I provide some tips that you can implement right away to jumpstart your savings.


  1. Pay Yourself First

    The easiest and most effective way to start regularly saving money is to pay yourself first by taking a specific amount or percentage out of each paycheck and depositing it in a separate savings account. If you have your paycheck directly deposited into your credit union checking account, you may be able to have a specific amount deposited or transferred into your credit union savings account. Another way to pay yourself first is to make the amount that you wish to save the first check you write at bill paying time and deposit it in your savings account.

    Perhaps, you think you can start with only a very small amount such as $5 or $10 a week. Transfer that amount weekly from your checking to your savings account. Or, set aside that much of your weekly cash in an envelope and deposit once a month (or whenever you're in a branch).
  2. Put Yourself on a Cash Allowance

    It worked when you were a kid, right? In my home, when the weekly cash allowance ran out, we just had to tough it out until the next "payday." (And we had to do chores to earn that allowance, too.) As an adult, I certainly use my debit card, but my team and I find that sticking to a cash budget for certain expenses helps control those amounts and opens up opportunities for small savings that can mount up. One colleague gets a set amount of cash each week that covers certain regular expenses and all discretionary expenses. For example, weekly groceries and personal items (socks, hose, toiletries, cosmetics) come out of that amount as do discretionary expenditures such as meals out, coffee shop stops, greeting cards, movies, other entertainment and the like. Any money left over each week goes into the savings envelope. A twist on this approach is to pay only with paper bills and save all coin change for deposit in savings. A tip: children enjoy rolling coins if you give them a cut for their savings.
  3. Institute a Shopping Moratorium

    If I had a dollar for every time I've heard someone say that they go shopping to raise their spirits, take their minds off their troubles, or chase a bad mood, my retirement plan would be stuffed (regardless of credit crises, recessions and depressed investment returns). Most of us would be amazed if we recorded and totaled all the spur-of-the-moment purchases we make in a week or a month. What types of goods or expenditures most tempt you? Clothes? Meals out? Games? Books or DVDs? Electronic gizmos? Resist those for a week or month and deposit the estimated savings. One expert in money management recommended thinking HALT when tempted to shop. Translated, that means never shop when you are hungry, angry, lonely or tired. Any of these moods make you more likely to impulse spend.
  4. Try a Wallet Lockdown Once a Week

    I can't remember where I first heard this concept, but it's a great idea and it could even be a fun challenge. The idea is that you will go one day a week without spending a penny. This doesn't mean that you spend ahead or after the day, but that you try to eliminate those expenditures. For example, rather than eat lunch out, you brown bag it from home. Yes, you paid for those groceries but a sandwich you make yourself typically costs much, much less than one you buy. For two cups of mocha magic at your local coffee shop, you could bring a pound of premium roast to work and enjoy dozens of cups on weekly wallet lockdown days. Walk or bike to work to save gas and parking. With a little effort, you can think of many ways to avoid spending that fit the patterns of your daily life.
  5. Put Off and Plan Ahead for Larger Purchases

    Will your car run reliability for another year, even if it requires a few repairs? You can use the extra year to save the payment cost and/or to save up more for a down payment on a new vehicle. You can use that time also to shop thoroughly for a vehicle that fits your needs, family and budget.

    What about appliances or your home's heating or air conditioning system? Are they in good shape or old and burning cash for fuel? With tax credits available for some energy efficient home improvements made in 2009 and 2010, it might be time to plan to make some changes. See www.energysavers.gov for more details.

    Do you really need a new wardrobe for each season of the year? Or will one or two items freshen up your look without costing a bundle? Put what you don't spend buying new clothes into savings.


Watch Your Savings Grow

If you are eager to start saving today, these strategies can help. The great thing about aiming to save something each week or each month is how quickly even small amounts will accumulate. That leads to greater peace of mind—whatever the economy does in the future.


Good luck!

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