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Saturday, October 22, 2016

10 simple tips for saving money

Saving money is one of those tasks that's so much easier
said than done — everyone knows it's smart to save
money in the long run, but many of us still have difficulty
doing it. There's more to saving than simply spending less
money, although this alone can be challenging. Smart
money-savers also need to consider how to spend the
money they do have as well as how to maximize their
income. Start with Step 1 below to learn how to set realistic
goals, keep your spending in check, and get the greatest
long-term benefit for your money.
Part One of Three:
Saving Money Responsibly

1:- Pay yourself first.The easiest way to save money
rather than spending it is to make sure that
you never get a chance to spend the money in the first
place. Arranging for a portion of each paycheck to be
deposited directly into a savings account or a
retirement account takes the stress and tedium out of
the process of deciding how much money to save and
how much to keep for yourself each month —
basically, you save automatically and the money you
keep each month is yours to spend as you please. Over
time, depositing even a small portion of each paycheck
into your savings can add up (especially when you take
interest into account) so start as soon as you can for
maximum benefit.
To set up an automatic deposit, talk to the payroll
staff at your job (or, if your employer uses one,
your third-party payroll service). If you can
provide account information for a savings
account separate from your basic checking
account, you should generally be able to set up a
direct deposit scheme with no problems.
If for some reason you can't set up an automatic
deposit for each paycheck (like if you support
yourself with freelance work or are paid mostly in
cash), decide on a specific cash amount to
manually deposit into a savings account each
month and stick to this goal.

2:- Avoid accumulating new debt. Some debt is
essentially unavoidable. For instance, only the
very rich have enough money to buy a house in one
lump sum payment, yet millions of people are able to
buy houses by taking out loans and slowly paying them
back. However, in general, when you can avoid going
into debt, do so. Paying a sum of money up-front is
always cheaper in the long run than paying off an
equivalent loan while interest accumulates over time.
If taking out a loan is unavoidable, try to make as
big of down payment as possible. The more of
the cost of the purchase you can cover up front,
the quicker you'll pay off your loan and the less
you'll spend on interest.
While everyone's financial situation differs, most
banks recommend that your debt payments
should be about 10% of your pretax income, while
anything under 20% is considered healthy. About
36% is seen as an "upper limit" for reasonable
amounts of debt.

3:- Set reasonable savings goals. It's a lot easier to
save if you know you have something to save for.
Set yourself savings goals that are within your reach to
motivate yourself to make the tough financial decisions
needed to save responsibly. For serious goals like
buying a house or retiring, your goals may take years
or decades to achieve. In these cases, it's important to
monitor your progress on a regular basis. Only by
stepping back and taking a look at the big picture can
you get a sense for how far you've come and how far
you have left to go.
Big goals, like retirement, take a very long time to
achieve. In the time needed to reach these goals,
financial markets are likely to be different than
they are today. You may need to spend some
time researching the predicted future state of the
market before setting your goal. For instance, if
you're in your prime earning years, most financial
commentators say that you'll need about 60-85%
of your currently yearly income to maintain your
current lifestyle each year you're retired.

4:-Establish a time-frame for your goals. Giving
yourself ambitious (but reasonable) time limits
for achieving your goals can be a great motivational
tool. For example, let's say that you set a goal of being
on your way to owning a house two years from today.
In this case, you'd need to investigate the average
home cost in the area you'd like to live in and start
saving for the down payment on your new house (as a
general rule, down payments are often required to be
no less than 20% of the purchase price of the house).
So, in our example, if houses in the area you're
looking at are about $300,000 apiece, you'll need
to come up with at least 300,000 × 20% =
$60,000 in two years. Depending on how much
you make, this may or may not be feasible.
Setting time frames is especially important for
essential short-term goals. For instance, if your
car's transmission needs to be replaced, but you
can't afford the new transmission, you'll want to
save up the money for the replacement as
quickly as possible to ensure you're not left
without a way to get to work. An ambitious but
reasonable time frame can help you achieve this

5:-Keep a budget . It's easy to commit to ambitious
savings goals, but if you don't have any way to
keep track of your expenses, you'll find that it's
difficult to achieve them. To keep your financial
progress on-track, try budgeting out your income at
the beginning of each month. Assigning a set portion of
your income to all of your major expenses ahead of
time can help ensure that you don't waste money,
especially if you actually divide each paycheck
according to your budget as soon as you get it.
For instance, on an income of $3,000 per month,
we might budget as follows:
Housing/utilities: $1,000
Student loans: $300
Food: $500
Internet: $70
Gasoline: $150
Savings: $500
Misc.: $200
Luxuries: $280

6:-Record your expenses. Keeping a tight budget is a
must for anyone looking to save money, but if
you don't keep track of your expenses, you may find
that it's difficult to stick to your goals. Keeping a
running tally of how much you've spent on various
types of expenses each month can help you identify
"problem" areas and adjust your spending habits to fit
your budget. However, keeping track of your expenses
can require a serious attention to detail. While
everyone should keep track of major expenses like
housing and debt repayment, the amount of attention
you devote to minor expenses generally increases with
the seriousness of your financial situations.
It can be handy to keep a small notebook with
you at all times. Get in the habit of recording
every expense and saving your receipts
(especially for major purchases). When you can,
enter your expenses in a larger notebook or a
spreadsheet program for your long-term records.
Note that, today, there are many apps you can
download to your phone that can help you keep
track of your expenses (some of which are free).
If you have serious spending problems, don't be
afraid to save every single receipt. At the end of
the month, divide your receipts into categories,
then tally each up. You may be shocked how
much money you spend on purchases that are
far from essential.

7:-Start saving as early as possible. Money that's
squirreled away in savings accounts usually
accumulates interest at a set percentage rate. The
longer your money remains in the savings account, the
more interest you accumulate. Thus, it's in your
advantage to start saving as soon as you possibly can.
Even if you're only able to contribute a tiny amount to
your savings each month when you're in your twenties,
do so. Relatively small amounts of cash left in interest-
yielding accounts for long periods of time can
eventually accumulate to several times their initial
For example, let's say that, by working a low-
paying job during your twenties, you eventually
save up $10,000 and put this money into a high-
yield account with a 4% annual interest rate. Over
5 years, this will earn you about $2,166.53.
However, if you had put this money away one
year earlier, you would have made about $500
more by the same point in time without any extra
effort — a small but not insignificant bonus.

8:-Consider contributing to a retirement account.
During the years when you're young, energetic,
and healthy, retirement can seem so far away that it's
almost not worth even thinking about. By the time
you're older and begin to lose steam, it can be all that
you think about. Unless you're one of the lucky few
who stand to inherit serious wealth, saving for
retirement is something you'll need to think about once
you establish a stable career — the sooner, the better.
As noted above, though almost everyone's situation is
different, it's wise to plan on having about 60-85% of
your yearly income available to maintain your current
standard of living for each year that you are retired.
If you haven't already done so, talk to your
employer about the possibility of contributing to a
401(k). These retirement accounts allow you to
automatically deposit a set amount of each
paycheck in the account, making saving easy.
Additionally, the money you deposit into a 401(k)
is often not subject to the same taxes as the rest
of the money in your paycheck. Finally, many
employers offer proportional matching programs
with their 401(k) services, meaning that they'll
match a certain percentage of each payment.
As of 2014, the maximum amount of money you
are allowed to place in a 401(k) per year is

9:-Make stock market investments cautiously. If
you've been saving responsibly and have a little
extra money at your disposal, investing in the stock
market can be a lucrative (but risky) opportunity to
make extra money. Before investing in stocks, it's
important to understand that any money you invest in
the stock market can potentially be lost for good,
especially if you don't know what you're doing, so don't
use this as a method for long-term saving. Instead,
treat the stock market as a chance to essentially make
educated gambles with money you can stand to lose.
In general, most people don't need to invest in the
stock market at all to responsibly save for retirement.
For more information on making intelligent stock
investment decisions, see How to Invest in the
Stock Market .

10:- Don't get discouraged. When you're having
trouble saving money, it's easy to lose your
nerve. Your situation may seem hopeless — it may
seem almost impossible to save up the money you
need to meet your long-term goals. However, no
matter how little you're starting with, it's always
possible to begin saving money. The sooner you start,
the sooner you can be on your way to financial
If you're discouraged about your financial
situation, consider talking to a financial
counseling service. These agencies, which often
operate for free or very cheap, exist to help you
begin saving so that you can meet your financial
goals. The National Foundation for Credit
Counseling (NFCC), a non-profit organization, is a
great place to start.

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