Do you find it hard to save money every month? Does it always seem like you do not have enough to save, even when you have the best intentions? Particularly, in this economic plane where many of us have decreased disposable income, it is difficult to carve out the savings we all know we need. Well, about two years ago I read an interesting article on MSN.com that helped me refocus my saving habits.
The article recommended that each time you spend money for any type of expense – gas, food, clothing, etc. you should charge yourself a $1.00 on top of the deduction amount. For example if I bought a blouse for $25, I would actually charge myself $26. With this concept, you could easily save at least 30 dollars a month (and that’s if you only complete one transaction a day; with the convenience of debit cards most consumers complete an average of 3-5 transactions per day). Most times your check register will have a fee column included on the transaction entry line, and this is where you would record the $1 fee.
I thought this idea sounded interesting, so I tried it even though I was a bit skeptical about the results. Each time I completed a transaction I would record it in my check register along with each $1 fee. At the end of the first month I was astonished to find that I had saved $50! That may not seem like a lot of money, but that alone translates into $600 for the entire year.
Interestingly enough, while this new practice helped me to save additional money each month, it also helped me pay more close attention to my spending habits. I began to focus on areas where I was spending more than necessary and curbed my expenses, which gave me more money to save along with the additional money saved from charging myself the minimal fee. I have enjoyed consistent savings as a result of this practice and it also takes some of the stress out of saving each month. Thanks, MSN, for sharing such a great savings idea! Here are a couple additional things to remember about monthly saving:
1. Any savings is good savings: The amount you’re saving doesn’t have to be extremely large, it just needs to be consistent. Don’t be intimidated by the misconception that you must save large amounts each month. What’s most important is developing the habit of saving and creating reserve income.
2. Identify Short-term and Long-term savings: When you begin saving, it is important to identify whether it is for long-term or short-term use. I recommend having two separate accounts, so the funds are not mixed. Short-term savings can be used for making large home or personal purchases, while long-term savings may be focused towards college funding, a down payment for a home purchase, or even a dream vacation. Clearly defining how your saved funds will be used is key to fostering healthy financial habits.