Here's Why You Need to Save

Are you saver? Don’t feel bad. Many Americans today don't have a savings account.  I have been a saver for years but it takes practice and discipline.  Your savings account is your safety net if case you get sick or lose your job you can use your savings to hold you for a few months until you can find a new job.

You should have enough in your savings account to pay your bills and monthly expenses for at least 9 to 12 months.  Money should be readily accessible and stored in a checking or savings account, preferably a high interest savings account such as Emigrant Direct or ING or a money market account where you can make money while saving money.

You can start by contributing small amounts to until you are able to contribute more even if it is just $5 a week.  Once you are able to contribute more do so.  Make several short-term goals. 

Once you have reached your first goal start developing some long-term goals such as planning for retirement or paying for your children’s college education.  A great site to learn about saving is  americasves.org.

A savings account will ensure that you are on the road to becoming financially secure and will prevent you from going into debt when an unexpected expense arises.  You may not know what the future holds but if you prepare your finances now, it will ease the burden of what tomorrow holds.  Here are 17 tips to save money.

1. Pack your lunch for work every day.  Buy drinks from the grocery store and skip the Starbucks.
2. Reduce spending by 30-50%.
3. Use direct deposit to send your paycheck directly to your bank.
4. If you get a raise, save most of the money received from the raise or use a portion of it to pay down debt.
5. Buy what you can on sale, use coupons or shop at a wholesale store such as Sam’s Club or Costco.
6. Buy whole foods, such as vegetables, grains, beans and fruits, instead of processed foods.
7. Check your local health food store or farmer’s market to buy grains, seeds, nuts, spices and legumes, in bulk.
8. Carpool or use public transportation.
9. Cancel your cable service or cell phone service or get the cheapest plan possible.
10. Use your cell phone to make long distance calls.
11. Shop around with various banks to find a checking account with no monthly fees.
12. Downgrade or downsize, buy a cheaper car or move into a smaller home.
13. Buy energy efficient appliances, ceiling fans, programmable thermostats, fluorescent light bulbs and lamps, or hot water insulator jackets.
14. Donate items not being used to a charity and write off on your taxes.
15. Rent movies instead of going to the movie theater.
16. Turn the lights out when you are not in a room for 20 minutes or more.
17. Turn the heat and/or air conditioner off when you are not at home or set at a low energy saving temperature.

Are You Stealing From Yourself

                                                   

Are you a thief? If you are in debt and have no savings or retirement you are a thief and are stealing from yourself.  According to a new report by the Consumer Federation of America and the Certified Financial Planner Board of Standards, 38% of Americans are living paycheck to paycheck.  One out of every 7 Americans has 10 credit cards.  According to the Federal Reserve Bank of New York, more Americans owe money on student loans than on credit cards. 

The Consumer Financial Protection Bureau (CFPB) estimates that 30 million Americans have debt with collection agencies. 43% of Americans spend more than they earn.   According to a new University of Michigan report 1 out of 5 families owes more on credit cards, medical bills, student loans and other unsecured debt than they have in savings. 

Many Americans have no emergency fund and little or no retirement savings. According to EBRI's 2012 Retirement Confidence Survey 60% of employees state that the value of their savings and investments is less than $25,000.  Due to the recession and its after-effects many Americans were unemployed for long periods of time and exhausted their savings and retirement accounts and racked up mounds of debt.  

Each time you swipe your credit card interest is accruing on the credit card balance.  If you don’t pay the balance off at the end of the month your credit card balance will continue to grow.  Paying for an item with a credit card on average costs 110% more than the original cost of the item.  Owing credit card debt makes the credit card companies rich and makes you poor.

Many Americans are so focused on paying down debt they forget about saving money.  No matter how much debt you owe you should also contribute to a savings account. Invest in yourself by contributing to a savings account.  You should have enough in an emergency savings account that covers your total monthly expenses and bills for 9-12 months.  You should put yourself first and follow the “Pay Yourself First” principle by putting money aside towards a savings account even if it is $1 a week then pay everyone else.   

If you are living paycheck to paycheck find a way to reduce your spending such as bring your lunch to work, skip the Starbucks and bring your own coffee from home, shop at discount grocery stores and discount stores such as Aldi’s, Save-a-Lot, Wal-Mart, Target, Bottom Dollar Food, Grocery Outlet and buy store brands, use coupons. You may prefer to buy meat, dairy products and fruits and vegetables at a local farmers market or a regular grocery store. 

Buying items you cannot afford it simply stealing from yourself.  Buying a car that costs more than your annual salary, owning a home that is upside down, owing student loans with a balance of $50,000 or more is not practical and causes extreme financial hardship.  If you make sacrifices earlier in life and do research to find the best offer for a loan or credit card, contribute regularly to a savings account and educate yourself about interest rates, credit card and personal finance you will be in a better financial position.  You will have to make hard sacrifices to get yourself out of debt.  Here are 13 ways to stop stealing from your yourself.

1. Pay in full. Pay balance in full each month to avoid paying finance charges.
2. Pay bi-monthly. Pay half of the balance with 1^st paycheck of the month then pay the remaining balance with 2^nd paycheck of the month.
3. Pay weekly. Pay the minimum monthly payment the 1st week after you get the bill, and then each week pay as much as you can toward the monthly balance. Repeat this every month.
4. Pay extra. Pay as much as you can when you get the bill, and then pay more towards the bill when you get extra money.
5. Automate. Set up automatic payments from your checking account the day you receive your paycheck or the day after you receive your paycheck to pay down debt.
6. Use unexpected income. Use your income tax refund, economic stimulus check, bonus check or sell new or used items on eBay.
7. Negotiate. Negotiate for a lower interest rate, get fees waived or request a settlement to help reduce the balance owed to make it easier to pay down debt.
8. Create a budget.  Balance your checkbook and create a budget to identify what you owe, what you earn and what you spend to find areas where you can reduce spending. Pay no more than 35% of your total monthly income towards housing, pay no more than 15% towards transportation, pay no more than 10% towards debt excluding mortgage, pay 10% towards savings and pay no more than 25% towards remaining expenses to create a balanced budget.
9. Live Below Your Means.  Buy needs vs. wants; buy only the things you need, delay the things you want until you have the money to purchase the item.
10. Pay with cash. Use credit cards for emergencies only and purchase items with cash.
11. Purchases. Avoid making bad decisions such as buying rent-to-own furniture or buying a big screen television and other items that have no value. 
12. Pay on time. Avoid paying late fees whenever possible. If you know you will pay a bill late contact the company to setup payment arrangements.
13. Keep balances low. Keep credit card balances at 20% or less of the credit limit. 

Why You Need an Unexpected Fund

Many Americans today don't have an emergency fund or unexpected fund. If you don’t have a savings account you will have to use a credit card or get a payday loan to pay any unexpected expenses.

Your emergency fund is your safety net, in case you get sick or lose your job you can use your emergency savings to hold you for a few months until you can find a new job or to help get over a financial crisis. Your emergency account should be separate from your checking or savings accounts and should only be used for emergencies such as an unexpected expense, unemployment, reduction in pay, sickness, major car or home repairs, medical bills, etc.

An emergency fund should be enough savings to pay your bills for at least 9 to 12 months. Money for an emergency fund should be readily accessible and stored in a checking or savings account, preferably a high interest savings account such as Emigrant Direct or ING or a money market account where you can make money while saving money.

To determine how much money is needed to pay 9 to 12 months worth of your bills do an inventory and write down all your bills and expenses and the monthly amount spent for each. Calculate the total. Use this amount and multiple by 9 or 12 to determine the total amount you need to save in your emergency fund.

You can start off by contributing small amounts to your emergency fund until you are able to contribute more. Start off with a contribution of at least $20 a month to your emergency fund. Once you are able to contribute more to the fund do so.

Once you have reached your emergency fund goal start developing some long-term savings goals such as purchasing a home, paying for your children’s college education, starting a business or planning for retirement. A great site to learn about retirement planning is www.morningstar.com and click on the Investing Classroom link morningstar.com/Cover/Classroom.html.

There are many organizations that provide emergency services for people such as the American Red Cross Emergency Assistance, Salvation Army Emergency Assistance Program and the United Way. The utility companies provide funds for people in need. These funds can be used to pay basic necessities and any other bills.

Why You Should Start Saving

Many Americans don't have a savings account. According to a study by the Commerce Department Americans spend all the money they have.

Your savings account is your safety net, in case you get sick or lose your job. You can use your savings to hold you for a few months until your situation improves. Your savings account should be separate from your checking, money market or investment accounts and should only be used for emergencies such as an unexpected expense, unemployment, medical bills, etc. Some of the main reasons Americans file for bankruptcy or go into debt is due to medical bills or lack of a savings account.

A saving account should have enough money to pay your bills for at least 9 to 12 months. The money should be readily accessible and stored in a high interest account, preferably an online savings account such as Emigrant Direct, HSBC, ING or a money market account where you can make money while saving money.

Write down all your monthly bills and expenses and the amount spent for each. Calculate the total. Use this amount and multiple by 9 or 12 to determine the total amount you need to save in your savings account.

Start by contributing small amounts to your savings account until you are able to contribute more. Start off with a contribution of at least $20 a month towards your savings account. Once you are able to contribute more do so.

Once you have reached your savings account goal start developing long-term goals such as planning for retirement. A great site to learn about retirement planning is www.morningstar.com and look under the Personal Finance section. Here are 8 easy ways to save money.

1. Saving coins in a jar – the money saved can be put in a high interest online savings account such as Emigrant Direct, ING Orange Account or HSBC

2. Using coupons especially during sales - the money saved can be put into a savings account

3. Use automatic deductions – sometimes it is easier for people to save money if they can't touch it or see it

4. If you buy a cup of Starbucks coffee at $4 a day and invest in with an annual rate of 10% you could have over $500,000 in 40 years

5. Get a free checking account and save up to $144 a year

6. Get a lower interest rate on your credit cards and save up to $422 a year

7. Save up to $400 a year on eating out by going to restaurants that offer coupons or specials or inexpensive dishes

8. Selling or donating unused items (clothes, shoes, toys, coats, purses, etc.) can save up to $1,000 a year