Are you working? Have you been working for a few years, but having nothing saved? Do you feel like you can’t breathe until you get your next paycheck because you don’t know if your last bar bill might cause your rent check to bounce? Or, maybe the electric company will have to fight the cable company for your money. I am sure at least once in your life you have made “Saving More Money” one of those often spoken about, but rarely followed, New Year’s Resolutions. Below, I will provide 9 easy tips to help you put your money where your mouth is! Even if you chose to only follow 1 of the tips, you will be in a better position tomorrow than you are today. Financial freedom will be within your reach!
The 9 Tips
1. Organize
These tips are not in any specific order, however organization is the most crucial step to accomplishing most goals, including saving more money. To organize, I suggest going back to the basics. You should begin by writing down every penny you spend over the course of 1 month, literally, every penny. Don’t forget the coffee at Dunkin Donuts, the newspaper at 7-11, house bills, entertainment bills, etc. Whether you use a paper and pen, smart phone, or iphone, it doesn’t matter. While writing these items down, you should also be categorizing them into various budgetary items. After 1 month you should have a clearer picture of how and where you are spending your money. Seeing these numbers for the first time should OPEN your eyes. At this point, you must choose what to reduce. No one can do this for you but without first knowing where the money is going, how can you know what to reduce?
(Example: $3 dollars a day in coffee doesn’t seem like a lot but if you look at the bigger picture, a year $3 X30days X12months= $1,080ß–pretty significant)
2. Use a budget/money software
This tip is a little more hi-tech but should not scare anyone away. There are great services out there (some for free) that will consolidate all of your accounts. This will allow you to get a macro view of your financial position. Once again, knowledge is power and being able to look at all of your account balances should help you make better financial decisions across the board, ultimately, saving you more money. A few examples are: www.mint.com, and www.quicken.com are free websites (quicken also has a downloadable program, for a price) and if you are Bank of America customer they offer an online service as well. This tip ties into tip 1. Get organized and start saving money.
3. Limit yourself to 1 credit card
This is not an article about reward points, fico scores or leverage, it is about saving money. Simplifying your life is an important component to saving money. When you have multiple credit cards, shopping store credit cards, various debit cards it’s very easy to lose control. Multiple balances, interest rates, and due dates can overload a person and leave room for error. Error in this case, could cause overdraft fees, bouncing checks and high interest rates. Limiting your “charging” capabilities should help you keep track of your spending and help monitor your cash flow properly, once again, leading down you a path of savings instead of waste.
4. Open up a high yield savings account online (higher interest)
This tip is very straight forward. Have you ever looked at the current interest rate on your checking account (I’m sure it’s under 0%) or your savings account at the local bank? (I’m sure as I write this, April 2010, it’s under 1%) You work very hard to earn a living. It’s time to put your money to work for you. Every dollar your money makes for you is one less dollar you have to save/earn yourself! You should open a high yield savings account. This type of account is FDIC insured, has slightly limited accessibility, and usually pays higher interest. (today ave. 1.25%) An online bank typically pays a higher interest rate, as there are no brick and mortar expenses associated with these institutions. The major con of this account is they usually do not provide ATM access and therefore you have to link another account to it, for withdrawals and deposits. I suggest moving most of your short term savings to this account, leaving 1-2 months of money needed to pay your house bills in your checking account. As bills are paid, you can replenish your checking with transfers from this account. However, the majority of your money should be earning the highest interest rate it can with the same banking protection.
5. Sign up for company retirement plan
The next two tips go together. The easiest way to save more money is to make it automatic. I mean really automatic. The first way to do this is by signing up for your companies’ retirement plan. Not only will they take the money right from your paycheck, and deposit it for you, they might even give you some of their money! This is another example of your money working for you. Whether it’s a 401k plan or Simple IRA, signing up is one of the best things you can do. If you are already enrolled, I ask you to increase your contribution by at least 1%. Because it’s pre-tax, you will not feel the hit dollar for dollar in your net pay. I have to believe that your bills will still get paid and your lifestyle will adjust to amount of net pay you receive.
6. Put your savings on auto-pilot
Tip 5 is similar to tip 4, without the company contribution. This is an after tax contribution. Every month you should have an automatic contribution go into an investment account or high yield savings account. This is like “paying yourself” and if you don’t think about it, your lifestyle will adjust again. 5 years later you will have more money saved than you could have ever imagined. Make the money disappear by moving into an alternative account automatically.
7. Don’t spend $5 bills
This tip was given to me by a great client. He simply told me that he stopped spending $5 bills. Every time he get a 5 spot he puts it in a jar in his kitchen. When it gets high enough he puts it in the bank. It’s a simple tip that helps him save money and he swears it works. I dare you to try it!
8. Buy “used” or introduce yourself to the local librarian
I don’t understand how Barnes and Noble is still in business. They sell a product that after it’s used once, it goes on a shelf and rarely ever touched again. The message is Stop Buying New Books! Get a library card. It’s a great tool. There you can borrow (for free!!!) books, music, and DVD’s! All the same items you have to pay for at Barnes and Noble. If you are a person that needs to own your copies, go online. Amazon and other online retailers sell all of these items at deep discounts. Maybe there is a dog ear somewhere or the cover isn’t perfect, but why does it matter. It’s a book!! The value of the knowledge inside is not based on the price you paid!
9. Take public transportation or carpool
It’s great to jump in your car, roll down the windows and rock the tunes. However, is it also fun to pay for gas, get oil changes, and repair your vehicle? A great money saver is to carpool to work, to the game, to movies, etc. And if you really want to be daring, go even further, take public transportation. They offer discounts if you buy in bulk and sometimes they can even get you to your destination faster with their own “special” lanes on the road.
Well, there you have it I have provided 9 easy tips to save more money. If you take only 1 of the tips to heart and “own” it you will have more money. Save more money!
About the Author
My name is Jared Friedman CFP®. I have been a Financial Advisor since I graduated college and is the only profession I know. I live, eat,and breathe financial advising. I have survived the turnover, the low odds, and the battle of “making” it as a young advisor right out of college. Believe me, it has not been an easy climb, and I am nowhere near the summit, but I can say with confidence I have made it to the first camp ground. Kudos to me..
My clientele includes multimillionaire business owners, retirees, middle managers, entrepreneurs, friends, family and more. I try to find nice people who I can help and who want to be helped…that’s it.
732-829-4353
www.jaredsfriedman.com
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