This is part two of a three-part series on managing your money.
This isn’t secret or new information. You know how important it is to save money, whether it’s for an emergency fund, your retirement, or for a special purchase. But sometimes saving money is easier said than done.
Here are some tips that might help you change your perspective and make it a little easier to save.
Consider yourself a creditor. Remember in the Budget or Spending Plan exercise how I had you go through your expenses, list them all out, and add up the total amounts due each month? I even suggested you pay yourself second, right after your tithe. To help you see this as something that’s essential rather than optional, treat your savings account like a bill.
When you pay your bills, write a check to yourself. Decide on a realistic amount. If you set the amount too high, you will either not save because you won’t be able to afford it, or you will save this paycheck only to have to dip into your savings account before your next payday.
Another way to prevent withdrawing your savings prematurely is to put it into a savings, investment, or retirement account. (The LAST place you want to keep it is in your checking account!) Then, pay your other bills as usual. If you find that you don’t have enough money to cover all your expenses, write down the amount you are short and look for ways to trim your budget: Borrow books from the library rather than buying new; brew your own coffee rather than buying it; consider raising the deductible on your auto insurance; buy store brands instead of name brands; cancel subscriptions to magazines you don’t read or can find at the library or online.
Once you establish a regular savings plan, consider increasing your monthly deposit if you get a pay raise, or when you pay off a debt. A bad habit that most of us develop is to increase our spending to equal the amount of our income. Instead, save that extra money.
For example, once you pay off your car loan, student loan, or other installment debt, deposit that amount into a savings account. Once your toddler is out of diapers, deposit the amount you spent on diapers into savings. You won’t miss the money if it’s put into savings, but more than likely, you’ll find a way to spend it if it’s in your checking account.
Need some fast cash? Have a yard sale. You can easily come up with a nice little sum by selling items around the house you no longer use, either online, at a garage sale, or at a local consignment shop. When you sell online, you may use an auction or classified ad site. Ebay and Craigslist are two of the best online places to sell your old stuff. Remember, one man’s trash is another man’s treasure! Check the sites for policies and procedures.
When you agree to consign items to a shop, you’re a consignor. You still own your stuff, but you give the shop the right to sell it. The shop becomes the consignee. When the items sell, you get a percentage of the selling price that you agreed to in advance. A profit split of 50/50 or 60/40, with the higher percentage going to the shop, is typical.
Avoid payday lenders like the plague! A payday loan is a cash advance secured by a personal check or paid by electronic transfer. Basically, this is your modern day loan shark. It is VERY expensive credit. If you want to borrow $100 until you get paid in two weeks, for example, you write a personal check for $115; $15 is the fee to borrow the money. The check casher agrees to hold your check. In two weeks, either the lender deposits the check or you extend the loan for another 14 days by paying another $15 financing fee. If you agree to electronic payments instead of a check, here’s what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15.
So, let’s do the math. The cost of the initial $100 loan is $15, which works out to a whopping annual percentage rate of 391% percent. If you extend your loan three times, the finance charge grows to $60 — remember, this is on a $100 loan. Some states have outlawed payday lenders for taking advantage of the poor. Frankly, I think ALL states should.
The truth is, you’ll never get ahead financially until you learn to budget and to save money. It takes discipline. There will always been something you want, or “need” to have. Until you reach the point where you want to have money in the bank more than you want the “stuff” it will by, you won’t save money.
But if you start today–even if it’s just a small amount–and then keep at it, you’ll be amazed how quickly that small amount can grow into a nice safety net.