Friday, May 9, 2014

The Pleasures of Saving

tree in field with money as leaves
When the recession hit, Americans responded quickly by changing their habits. The savings rate grew steadily in 2008, rising to 2.9 percent in the final quarter, and economists are predicting it will continue to grow as much as 6 percent.

Kelly Walters of Gulf Breeze, Fla., is one individual newly converted to the pleasures of saving. “I used to be a real keep-up-with-the-Jones’ guy, especially when it came to electronics and cars,” he says. “But I’m amazed at what a great feeling it is to have some money stashed away. I find there’s even a magic number — as long as my wife and I have a certain amount saved in our saving account at the credit union, I feel a sense of well-being I never had when I was living paycheck-to-paycheck and juggling to make bill payments every month.”

Walters finds that watching his savings grow affects his other financial behaviors. “The more we save, the more cautious I am about big purchases that could erode our savings,” he explains. “Now I feel sorry for my friends when I see them making choices, such as upgrading a car, that are based on status, rather than on what’s best for their families.”

Saving goes hand-in-hand with knowing exactly where and how your money is being spent. So, to help beginning savers launch their savings plan, many financial advisors recommend creating a budget if you don’t already have one. For those who are having particular trouble putting a check on uncontrolled spending, advisors will often recommend a micro-budgeting exercise, where household members track every penny they spend for a week or more, to learn exactly how much every spending habit costs.

These exercises can prove very valuable. But to jump-start your savings plan, the best advice is to simply put some money into savings first before a single bill is paid. Make it the first priority, even if it’s only $5 per pay check. As your savings grow, you’ll find ways to cut spending even more and make the savings grow faster, because you’ll learn the pleasure of saving.

girl putting coins in a piggy bank

Basic Saving Tips

  • Bring lunch to work. If buying lunch at work costs $5, but making lunch at home costs only $2.50, then in a year, you could afford to create a $500 emergency fund and still have money left over.
  • Save your loose change. Putting aside fifty cents a day over the course of a year will allow you to save nearly 40 percent of a $500 emergency fund.
  • Ask your physician to consider prescribing generic drugs. Generic drugs can cost several hundred dollars less to purchase annually than brand-name drugs. 
  • Use only the ATMs of your credit union. Using the ATM of another financial institution once a week could well cost you $3 a withdrawal, or more than $150 over the course of a year. 
  • Keep your car engine tuned and its tires inflated to their proper pressure. Doing both can save you up to $100 a year in gas.
  • Borrow books rather than purchasing them. Borrowing books and reading magazines at your local library, rather than purchasing reading material, can save you hundreds of dollars a year.

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