Saving Your Way out of Financial Distress
It is a given, most of us would rather spend our hard earned dollars on luxuries and feel good impulse buys than save our pennies and cents for a rainy day. We think if we put so much effort and time earning the money we should be able to spend it as we choose. Immediate gratification for a month well done.
Saving money is among the wisest principles to have. Whether your take home is large or small, putting away something from your paycheck should be second nature if not for necessity then at the very least for posterity. Extra dollars not only make your dreams, they also allow you to sleep at night.
Starting to save is the hard part, if you make it a habit, saving becomes easier as you go along.
Few people regardless of how much money they make really know how to save.
This is an easy to follow guide on saving as a way of life.
1. Save your loose change at the end of every day
Remember the piggy bank you received for Christmas at 6? You probably asked for something bigger than your parents wallet that year. In true parenting tradition they then thought it necessary that you begin to learn the value of money. The same holds true, money has more value when not readily available.
Begin to put aside the nickels, dimes and one dollar bills you have in your pocket at the end of every day just before you go to bed. You will be surprised at how quickly the amounts add up.
2.Leave credit cards at home
You should not spend what you do not have. In all possible cases try to pay for things with cash or by check every time you shop. This way you will not only spend less but you also avoid high interest charges on unpaid credit card balances.
3. Automatic saving plans
If you cannot see it you cannot spend it.
Automatic Saving remains the easiest way to save. especially for the undisciplined spender.
Place a standing order with your bank - a standing order is a written instruction from you the account holder - to have a specific amount withdrawn from your paycheck at the end of every month and transferred to a separate account. You can choose from
a. A savings account with the same or another bank. Have your bank transfer the amount straight into a savings account from your checking account every month whether money comes in or not
b. A money market fund of choice. Have a mutual fund withdraw money from your checking account and put into its highest yielding moeny fund that particular month. With this system of saving you have the added value of capitalizing on market value for your money with diverse investments.
4. Contribute to a stock purchase plan
if you are lucky enough to work for a company that allows employees to contribute part of their salary to buy stock within the company so much the better for you. Please proceed to do with immediate effect, the long term benefits are immense not to mention what it will do for your motivation at work.
5. Reinvest in stock dividends
Buy stock in any publicly held corporate, rather a company whose shares have been traded to the public through a stockbroker. At the end of every financial year, the stock you purchased should ideally have returns on your initial investment. These returns are known as dividends.
With the dividends come brokerage commissions, which eat into whatever amount you may have earned.
(Sometimes the principal amount is so minimal the commissions charged cannot allow investment)
It is therefore a wise move to reinvest these dividends into buying more shares of the same company.
Most companies allow existing shareholders to participate in a ‘ Dividend Reinvestment Program’ or DRIP.
Within no time you will be earning enough on your initial investment to trade for shares in different areas
6. Keep making payments
When you’ve paid off a mortgage or loan, continue to write a check for the same amount for a little while longer and put it into savings. You have learnt to live without this money so keep doing so for as long as you can while you’re in the habit.
7. Bill yourself
At the end of the month when you pay your bills:- Rent, Water, Power, the usual necessities; designate an amount of money, consider it a utility and write yourself a check to deposit into a mutual fund or savings account. Start off with 1% of your salary, increase the amount with each month and by the next year you’ll be saving upto 12% annually on savings without feeling the pinch.
8. Treat yourself
Regularly take a little (and I stress little) out of your savings for the feel good buys we talked about earlier. It will make you feel less like a scrooge and more like a disciplined saver. After all it is your money and you deserve to have it work for you.
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