Stop Leaking Cash (page 3 of 3)

Think Small to Build Big

A lot of people only think in big terms for savings -- feeling that if they're not putting away $500 a month, then the effort is just not worth it. That kind of thinking is really destructive. If you're not used to putting away any money for savings, start small. Can you find $25 a month to go into a savings account? Most people can find that much just by cutting out a movie, a dinner out, or even a really lengthy long-distance phone call. If you can free up $25 per month to go to savings, you'll be $300 a year richer; if you can free up $25 a week for savings, you'll be $1,300 a year richer. Because the money you put aside will be earning interest, you'll be surprised at how fast even small amounts of savings will grow. Put it in perspective: If you save just $1 a day, by the end of the year you'll have $365. In an account with a four percent interest rate, that would actually become $372 (you've made $7 by doing nothing). In ten years, you'll have saved $3,650 or, at the same interest rate, $4,487. As you can see, over time it all adds up.

Bonus Tip: Unexpected Income?
When you have a windfall -- bonus, gift, extra cash for extra work -- use the rule of thirds to determine how you'll use it:

• One-third for the past. Use one third to pay down a debt.
• One-third for the present. Use a second third to make a home or personal improvement you want.
• One-third for the future. Put the final third immediately into some sort of savings or investment.

If you follow this rule, you'll see your debt shrink, your savings grow, and you won't feel deprived.

Sneaky Savings
Another trick to help you save more (or pay down debt much faster) is to take an amount from a debt payment that has been paid off and continue paying it -- either into a savings account or into another debt. For example, let's say you have two car payments, one for $300 and one for $230. Once you pay off the lesser debt, just begin adding the $230 to the second debt and make new payments of $530. You'll be amazed how quickly you pay off the second debt (and save on the loan's interest as part of the bargain). Once that second debt is paid off, try tucking that payment into a money market savings account and watch your savings take off. Because you are already budgeting for the $530 to be unavailable to you each month, this strategy may be the most painless way to build up your savings.

Safety Margin Plan for a Rainy Day
Conventional wisdom dictates that you set aside three to six months of living expenses in case of an emergency. To safeguard this critical safety net fund, you'll want to put the money into a money market account or short-term certificate of deposit (CD). That way you won't be tempted to dip into it. Only bank your money with institutions that are insured by the Federal Deposit Insurance Corporation (FDIC), which will protect your money up to $100,000. If you have more than this amount, spread your money among different banks so all your savings will be covered.

From Penny Pincher's Almanac

 

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• Get Out of Debt
• Getting out of debt is one of the most important positive steps you can make for yourself and your family. Make 2008 the year you finally clean up your finances.
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• Lose the Weight
• Maintaining a healthy weight is always important. Here are some easy changes you can make to your diet and fitness routine in 2008 to get back on the track to wellness.
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• Quit Bad Habits
• Bad habits are crutches that hold us back. Read the following articles to begin the process of moving forward with your life in 2008.
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• Organize Your Life
• Put everything in its place this year with these tips for maximizing space and cleanliness.
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• How to Make Time For Friends and Family
• Ideas on how to spend more quality time with your nearest and dearest.
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