With wages down and cost of goods up, it's not easy to save. After years of savings rates close to zero however, Americans are getting smart about their money again: even though the economy is still in a rough spot, we're saving an average of 6.4%, according to June data from the U.S. Commerce Department. Not bad, but if you're like most people, you would probably like to do better. Here are five ways to trick yourself into saving more.
IN PICTURES: 7 Millionaires By Marriage
- Go On Autopilot
Ever heard the phrase, "pay yourself first?" It's the best trick to get into the habit of saving: when you pay your bills come payday, budget for your savings just like it's another bill you're paying. Set up separate accounts for emergency savings (for when the car breaks down, or the water heater breaks), retirement and for more fun goals like that family vacation.
Make your savings a no-brainer by setting up an automatic transfer to the account(s) on payday, so you're not tempted to spend the money elsewhere. Even if you just set up $20 a bi-monthly paycheck, that still adds up to $480 a year - and you probably won't even miss it. As you get used to saving, try increasing the automatic savings by a little bit every six months. (A recent HSBC study suggests that savers had an easier time weathering the recent financial storm. Learn more in 4 Reasons Why Savers Fare Better Than Spenders.)
- Keep the Change
Remember that big jar of change you had in your college dorm room? Bring it back into fashion, and empty your wallet of change a few times a week. Get the family involved; if you have kids, have them draw a picture of what you'll do with the money once the jar is full. Exchange the coins for bills at your local bank for a small fee, or use one of the coin exchange machines in the supermarket - check around to make sure your savings don't get cut too much by exchange fees.
Keeping your change over the course of a year can easily add up to a few hundred dollars in savings - another painless way to save. And you'll really grow to love those pennies that used to clutter up your wallet.
- Forget the Raise
Got a raise? Congratulations! Before you start spending this windfall, increase your automatic transfer to your savings account to reflect that pay increase. If it's an annual cost-of living increase, you've likely already adjusted to higher prices, and if it's a promotion-related raise, you won't miss the money.
Instead of spending your extra pay, put it towards something that's important to you, like retirement savings or a family vacation. (There are many ways your employer can make your job more pleasant, even when money is tight. Check out Can't Get A Raise? Negotiate Your Benefits.)
- Keep the Habit
It took you years, but you finally paid off your car. Instead of being tempted to spend the extra cash you now have each month, pretend you're still making that payment, but make it to yourself instead. You can set up an automatic transfer to savings for the payment amount; if you're really looking ahead, you can set the money aside until it's time to replace your car. Imagine going to the dealership years from now and paying cash for your next car - now there's some motivation to keep those payments going into savings.
- Finders Keepers
We all run into the occasional found money: that rebate check you forgot about, the $20 in your winter jacket from last year or that larger-than-usual tax refund. Instead of blowing this money at your local store of choice, put it into savings. You won't miss the money, and it'll get you closer to your goal if you put it in your savings account, accruing interest.
If you're having a hard time resisting temptation and want to have some fun now with your extra money, consider splitting the amount in two: half into savings, half fun money. This way, you can feel good about investing in your future, but still have a little fun today. (This year, find out how to stretch these dollars further to strengthen your future. To learn more, read 5 Ways To Make A Tax Refund Work For You.)
The Bottom Line
Saving money doesn't have to be difficult. With these tricks, you can take the work out of setting money aside, getting you on your way to reach your savings goal quicker than you would have thought.
Catch up on your financial news; read Water Cooler Finance: Billionaire Pledges and Other Positive Press.
InvestingSavings is as crucial as ever, as we deal with life changes and our needs for the future. Here are some essential steps to get started, now.
ProfessionalsAlthough market crashes are usually bad news for your portfolio, there are several ways to minimize losses or even profit outright from market movement.
RetirementRobo-advisors can add a layer of affordable help and insight to most people's portfolio management efforts, especially as the market continues to mature.
ProfessionalsThere are many reasons why folks in their 60s may want to keep working until at least age 70. Here are three.
RetirementAs a U.S. nonresident, deciding what to do with your 401(k) after you return home comes down to which tax penalties, if any, you're willing to incur.
RetirementUnderstand how annuities work, and identify the benefits they provide for retirement, the most salient being a guaranteed income stream for life.
ProfessionalsMore than any other demographic, this group is woefully underprepared for retirement. Here's what they can do to change that.
ProfessionalsWith the stock market bumpy, some folks nearing retirement might be nervous. Here's how to create some wiggle room for your portfolio.
ProfessionalsSoon to be retirees are often told it's best to wait until age 70 to collect Social Security. Here's why this is not always the best advice.
ProfessionalsBetween delaying filing, claiming strategies and taking advantage of special marital benefits, there are several ways to maximize Social Security.
Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
Whether your IRA can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There ... Read Full Answer >>
Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>
A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>