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The following is a guest post by Check ‘n Go.
Saving money is hard, plain and simple. It’s tough to save when bills pile up and you feel like the future is far away, especially when you need to solve problems right now.
But, saving money is also one of the most essential parts of your finances. If you’ve resolved to start saving money, it’s a valuable and important goal. Consider these money-saving tips to help secure your future.
1. Look realistically at your finances
It’s important to understand your needs. They vary family to family, depending on your specific responsibilities. People who have children are going to have very different responsibilities than people who have hamsters or just dogs.
Figure out all of your expenses so that you know where your money is going, and where you can cut costs. Also, try keeping a list of all you’re spending in one month: it will help you realize where you need to cut back, and where your essential expenses lie.
2. Put money away every month
Once you’ve taken a clear-eyed look at your finances, start saving. Don’t give yourself the chance to back out; set up an automatic withdrawal that deducts money from your account, either every month, or whenever you get paid.
3. Contribute to a 401K or Roth IRA
If your job offers a 401K, start contributing as much as they will match. It might not feel great for your paycheck, but it’s an investment in your future. Unless you have nowhere else to turn, never borrow against your 401K. If you do, consult with a financial advisor beforehand.
If your job doesn’t offer a 401K, look into a nondeductible IRA or a Roth IRA, so you can start contributing to your retirement.
4. Put away money for your children’s future
If you have children, then you’re probably considering their future education. Based on your current responsibilities, you could have a realistic projection of your future finances. As much as you might want to pay for their education, you do have to consider your own finances. If supporting your children now means they need to support you later, you need to weigh your options. If you do decide that you can afford to pay for your child’s college, then it’s worthwhile to look into a 529 plan that can help you save for your child’s college. There are prepaid tuition programs that allow you to purchase a year’s worth of college tuition at the current rate, as opposed to the future, exponentially increasing rate.
5. Look into tax cuts
Even if you weren’t looking into tuition savings, it’s worthwhile to see if you’re eligible for tax cuts or government-supported programs. Houses, tuition, and even certain bills are deductible, and these deductions could save you quite a bit of money in the long run.
Even people with the best kept finances find themselves in trouble sometimes. An emergency can drain your finances quickly. Having a cushion of savings to soften the fall means you won’t be driven into debt, or have to borrow money from friends or relatives. Having a backup plan will help you feel safe and secure, even in a bad situation.
Saving money, even if it’s just a little bit every month, is extraordinarily important. It provides you with a valuable way to cement your personal security, and take care of your family down the road.
How about you all? What techniques do you use to make sure you are saving enough for your future and/or emergencies? Do you use any on this list?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- @ Developing a frame of mind that facilitates saving – It’s very true that saving is quite hard for many people. I think this is especially true when people are not raised with the saving “mindset.” It takes a good bit of mental resolve to force yourself to forgo current pleasure (spending) for enhanced living later in life.
- However, the easiest way that I have found to make saving more of a part of my life is to think of it as a challenge/hobby. This makes it fun and more motivating all at the same time!
- @ Tracking your spending to determine your financial needs – This is a practice that I personally employ in my personal finances at least every time I move to a new location or my financial situation changes. By tracking your spending, you can figure out what categories you need to devote money to and how much you can pay yourself first with in order to save for your future.
- @ Automatic deductions for savings – Once you have tracked your spending and know how much money will be left over to save/invest at the end of the month, it’s important that the money be transferred over to your savings account without you having to think about it at the beginning of the month (before your wallet has the chance to spend it!).
- This comes in very handy for me with my dream and life values savings accounts. If ~3% of my after tax income each month was not automatically transferred over to my savings account, I probably wouldn’t consistently save the money.
- @ Saving money for your children – I am in agreement with the advice above that saving money for your child’s college education should not come at the detriment of your personal finances.
- I read a book once that said that the best financial gift parents can give their children is for the children to not have to financially support them once the parents retire.
- Going along with this advice, I would encourage parents to first make sure they are saving as much as they can for retirement before looking at an educational savings plan for their children.
- Another option for keeping educational costs low is to encourage your children to attend a state school instead of an expensive private institution for the higher-educational endeavors.
***Photo courtesy of http://www.flickr.com/photos/o5com/5126344583/