Copyright (c) 2008 Thomas Husnik

A consistent approach to personal savings is fundamental to a healthy personal finance plan. You will find that by including savings in your budget that you reduce your chances of getting into overwhelming debt that so many find themselves in today. These people in the overwhelming debt are those who never learned to save for what they want instead of using credit only as a tool to purchase high-priced items that would be out of a person’s reach otherwise (such as a home or car). But whether you are in debt or just starting out and have no debt, you should start a savings plan.

For those already caught in the grips of debt and using their credit cards to handle those unplanned expenses, you need to cease that kind of spending now. By opening a savings account and depositing just a little each time you are paid you will see it add up over time and it will be a great reserve for when you do have those unplanned expenses. Can you put aside $10 every time you get paid? Can you set aside more? The amount is not as important as getting you into the habit of saving and making it part of your personal financial plan.

Saving will be hard to get used to at first if you are in the habit of using credit cards. Bad habits are very hard to break. One thing you can try and it can be a great motivator is to take what money is freed up after paying down credit cards and putting it into savings. For example, let’s say your minimum payments on credit cards each month totals to $200. So you decide it’s time to get out of debt and you start paying extra on the credit cards and then the next thing you know, the monthly payments total to $150.00. You can set aside the $50 in your savings account and in some ways you never miss it because you were accustomed to paying $200 each month. And the money builds in a cash asset account that you can get access to if you have an emergency instead of using the credit card.

401K and 403B savings plans offered by your employer are also good ways to save. The advantage here is that your employer will typically match up to a certain percentage of what you contribute so it’s in a way like free money. Contribution to the plan is typically handled by payroll deduction so in a sense what you never see, you never miss. These plans also, for the most part, yield much higher rates of return because your funds are invested in the stock market or mutual funds. But this type of savings is normally not used for short term emergency expenses as withdrawal comes with penalties and tax implications. These plans are used mostly for retirement savings.

Avoid making deposits into your savings account that are so large that you have to later go back and withdraw a portion of it to cover living expenses. Just start small and build it over time and soon you can get yourself off of credit card dependency and build a valuable asset.

Stagnant incomes and rising costs for everything from bacon and eggs to heating oil have consumers feeling jittery. With a rather gloomy economic outlook for the near future, families are tightening their belts and examining where every penny goes. With personal savings at an all-time low, it might seem impossible to actually build a nest egg for the future. With a few tips and tricks like these, your coffers can start to grow, even when times are tough.

Why Save?

Not so long ago, credit was only for the wealthy. Ordinary folk had to pay cash or use outdated methods like layaway. The modern revolution in credit changed all that, and as a result, reduced the need to save for life’s necessities. Credit in all its many forms is a tremendous benefit, but it has lulled us into some bad habits. Spending every dime we make leaves no room when financial surprises occur. Savings can make all the difference in dealing with the unexpected as well as achieving long-term goals.

Strategies to Start Saving

Coffee cans, cookie jars, piggy banks and the mattress were the places our grandparents liked to stash their cash. Don’t go there. Open a savings account at a bank or credit union. Contribute to it via payroll deduction to make it easy. Start small. Even $5 or $10 per paycheck will help. This money is strictly hands off. Think of it as the 911 fund. Saving for major emergencies is a good start toward better financial stability.

Long Haul Savings

A simple savings strategy for long-term needs is using the dirt-cheap option of U.S. Government Savings Bonds. For as little as $50, individuals can invest in government backed bonds that will pay interest, and may offer tax benefits, especially if the bonds are used to pay for educational expenses. As investments go, risk is low. The return is modest too, but more dependable than stocks. Bonds can be part of an effective savings strategy for big-ticket items like college. The key is letting the money collect interest over a long period of time. Don’t confuse long-term savings with emergency fund savings. Both are needed.

Savings Diet

Starting a savings plan is a bit like going on a diet. Eliminating the junk food, midnight snacks, and counting calories are boring but effective diet tools. Carving out a few dollars to devote to savings is much the same. Vices are easy to target but let’s face it; most of us won’t give up a beer with friends to meet our savings goals. Try to view savings contributions like a utility bill. Going without water or energy isn’t an option. Going without savings shouldn’t be either.

Sneaky Savings Strategies

Congratulations on that raise or yearly bonus. Gifts, inheritances or any financial windfall is an opportunity to save. Just take a small slice and set it aside. Next time you get a raise, take the opportunity to increase that emergency fund contribution from $10 per paycheck to $20. It’s a painless way to save more.

Savings strategies like these will slowly help make the shift happen. Make savings become just another tool to get what you want, instead of what your creditors want.