Do you have a savings account that would last a few months if something happened and you weren’t able to pay your bills? Have you started putting money away for retirement? Can you comfortably pay for your child’s college education? For many, the answer is “no” to all of these questions. If that’s the case, don’t despair—you can start saving anytime to put yourself in a better financial situation! Here are some easy money saving tips that you can implement to start saving money in 2019.
This post has been sponsored by CreditRepair.com. All opinions are mine alone and are honestly conveyed.
Save as early as possible
The earlier you can start saving, the better. The compounding effects of interest on your money over time, will allow you to save more money than you could on your own. Think about the following example: Two men (Man A and Man B) start putting $200 per month into a retirement account for the next 20 year. Both accounts earn 4% interest each year. Man A is age 25; Man B is age 45. So at the end of those 20 year, the Man b will need to start taking his money out for retirement. Man A still has an additional 20 years for his money to earn interest. So even though they put the same amount in and earn the same interest rate, Man A, who started saving at age 25, will have more money in his retirement account because it has longer to earn interest on the entire amount.
Enroll in your employer’s 401k
If you have a job working directly for an employer, you will definitely want to enroll in the 401k plan, if they offer one. Most employers do offer some sort of retirement plan that you can contribute to, and that they also match your contribution—up to a certain point. For instance, if you contribute two percent of your income each month, your employer may match that two percent, so in total you are saving four percent of your income each month, but it is only costing you half the amount! This is a great way to really increase the power of how much you can save when you take advantage of the employer match.
Open an IRA or Roth IRA
Even if you already contribute to your employer’s 401k plan, you should also consider opening an IRA, or Individual Retirement Account. A Traditional IRA can give you an additional tax break each year that you contribute because you are using after-tax dollars to fund it. So when you do your taxes, you will get to deduct Traditional IRA contributions. Or, if you don’t need the additional tax break now, you may want to consider opening a Roth IRA, as those offer tax-free growth on your investment. This option is nice, because even though you are paying tax on your contribution money now, you won’t have to pay tax on the money when you draw it out in retirement. And depending on how well your investments do, you may have accumulated quite a bit of tax-free money!
Set money aside when you get paid
Regardless of whether you are self-employed or work for an employer, get paid weekly, bi-weekly, or monthly, you can still set aside money each and every time you get paid. I call this the Payday Savings Plan. It is a simple concept of setting aside money in savings or a retirement account each time you earn money. Make it a habit to pay yourself—in the way of savings—just like you would pay any of your other monthly bills.
Start an emergency fund
Many experts believe that everyone should have at least 3-6 months of living expenses set aside in an emergency fund. In case something unanticipated occurs, such as an accident or an unexpected illness, and you are unable to continue going to work or generating a paycheck, an emergency fund will allow you and your family to still be able to cover your typical monthly expenses during that time. Even if you don’t have enough to cover the entire 3-6 months of living expenses, build up as much as you can comfortably.
The key to saving
One of the easiest ways to save money each month is to set up automatic savings. What this means is, have the money automatically set up to come out of your paycheck and go directly into your savings account, 401k, or IRA. It is much easier to not spend money that has never come into your regular checking account. If you can’t set it up to directly transfer to a savings account, make sure to prioritize savings before you use your disposable income each month (the money left over after you pay all your bills).
Everyday money-saving ideas
Most of what we have talked about is considered longer-term savings—for the future, to make sure you are more financially secure. But what about everyday savings? How can we save money in the short-term?
- Meal plan—while you may think that this only affects what you may be eating for dinner for the week, think again. Have you ever gone to the grocery store for milk and eggs, and left with a cart full of groceries? Yeah, we all have. But, if you plan your meals out for the week and make a list (and only buy what’s on your list), you will save a lot of money at the grocery store each week. Meal planning can help you put a stop to the impulse buys and help keep your budget on track.
- Buy generic alternatives—many generic alternatives or even private label store brands are actually produced by the name brand company. Because these products have been produced at a bulk rate, the savings are passed on to the customer. You can cut your grocery bill even more by choosing generic or private label foods.
- Clip coupons—but only for items that you typically buy. Saving $0.50 on something is only worth it if it is something that you were already going to buy. If it is an additional purchase that you are making, then it might cost you money. Also look for stores that offer double coupons and save even more!
- Don’t “window shop”—in other words, don’t go to the mall and browse through the shoe department at your favorite store if you don’t actually need shoes. While you are there, it can be really tempting to see a “good deal” and forget that you were only supposed to be looking.