Finding Ways to Save
If it seems that you’re having trouble saving enough from your monthly income, you’re not alone. Often, there is too much month by the end of the paycheck. Nevertheless, if you know that at your current rate of saving you’re going to fall short of reaching your goals, you owe it to yourself to find ways to increase your savings: 1. Track your monthly expenses, to the penny. Most people don’t really know exactly how they’re spending their paychecks, especially when it comes to cash purchases. Pay particular attention to nice but not necessary expenses like entertaining, eating out, vacations, memberships, and subscriptions. If a comfortable retirement or college education is a looming priority, consider cutting back or even eliminating some of these discretionary expenditures. To start, try focusing on just a few of the largest — that can provide bigger savings faster than focusing on a lot of small expenditures. 2. Keep a budget. Make two columns: income and expenses. Then make a line entry for every income source and every expense. Add up the columns and compare. If there’s more in the income column than the expense column, budget that for savings every month. If there’s more in the expenses column, or the leftover is too small to meet your savings goals, find ways to cut your expenses. Then treat contributions to your savings accounts as an expense on which there is no compromise. 3. Fool yourself into saving more. The way to save more is to pay yourself first. The problem is that, under the pressure of being sure to cover all of your bills, it’s all too easy to treat a commitment to saving like a New Year’s resolution — nice in principle but not in practice. The solution could be to mimick a workplace payroll deduction plan: establishing automated monthly transfers from your checking account into a savings or retirement account of your own. 4. Maximize your employer’s matching contributions. Many employers will match employees’ retirement contributions up to a certain percentage of the employee’s income. If you’re not contributing up to that maximum percentage, you’re losing out on free money. This is the one of the most powerful ways to boost your savings rate. 5. Don’t spend your next raise. The next time you or your partner get a raise, devote all of it to saving. It’s often less painful to forgo spending money you didn’t have before than to spend less of what you have now. 6. Avoid tax refunds. If you get a big check from the Internal Revenue Service every spring, it means that you’ve been making tax-free loans to the government all year (through too-high payroll tax deductions or installment payments on self-employment income). So reduce those payments (though you don’t want to have too little withheld, either — in some cases you could face an underpayment penalty in addition to a big tax bill). Once you’ve got your withholding or installment payments at the right level, direct the extra free cash flow to your savings accounts or retirement plans. 7. Deduct every allowable business expense. Experts say that many legitimate expenses are not deducted on tax returns. One main reason is using one credit card for both personal and business purchases, which makes it more difficult to ferret out deductible business expenses from nondeductible personal ones. To prevent this from happening, open up a separate business credit card account. 8. Un-premium yourself. Can you still feel good about yourself without driving the most luxurious SUV, flying first class, wearing designer-label clothes, and using the most expensive cell phone data plans? Taking these down a notch or two could help you find the missing ingredient for your long-term happiness — a nice nest egg in the bank.
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This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.