Sunday, February 3, 2013

Best Ways to Save Money

Best Ways to Save Money That Are Easy and Automatic

Have you ever considered some of the best ways to save money?  Saving money often depends on ways to make it easy and automatic. People don’t often save enough when it’s left up to them to decide. Given a decision of spending an extra $100 a month, or saving it, most of the time it will be spent whether consciously or not.
There are some ways to make saving more automatic each month so you don’t have to think about it as much.  If your savings is automatic you don’t have to make a conscious decision to save and you can save more if you don’t see the money.
Here are some of the best ways to save money:

1. Automatic Transfers

Best Ways to Save MoneyThere is already an easy service to take advantage of with automatic transfers of money into your savings accounts. You can set up such savings transfers through banks such as ING Direct and Ally Bank to occur based on a scheduled day each month.

2. Automatic Deposits

Or, you can contact your HR department and have them deposit a portion of your paycheck directly into a savings account. As with the above option, it’s kind of like never having the money to begin with; you learn to live without it while your savings grows.

3. Treat Savings as a Bill

If you look at savings as another bill that must be paid each month, you’re more likely to save versus spending it. This requires including that savings as another line item in the budget and paying it at the first part of the month, or when you get paid.  Doing so, sort of takes the decision out of saving.  It’s a bill, so you must pay yourself!

4. Get a tax refund?

Some would say getting a tax refund is a good idea. Do you think a tax refund is good or bad? Well, one argument is getting a large tax refund is a way to create a barrier to your money for the entire year. Yes, you’re loaning your money tax free to the government, but typically you’re not losing much in interest. Personally, I prefer to have the money in my hands to manage each month, but I thought I would include this as an option.

5. Flexible Spending Accounts (FSA)

While it might not be savings for an emergency fund which includes quick access to cash, Healthcare FSA’s are a great way to unconsciously save. Once you’ve made the decision on how much and signed up, the amount is automatically saved each month for your healthcare expenses.  Contributions to FSA’s are before taxes which provide you with more spendable income each month you’d otherwise lose out on because of taxes.

6. Invest in a 401(k)

401(k)’s are certainly easy savings options.  Granted, you still have to sign up and choose your investments and allocation. However, it’s relatively easy process and most employers connect you with an advisor to help make investment decisions.  Since a 401(k) is also deducted before taxes, your taxable income is less thereby saving your more money to allocate in your monthly budget each month.  At the same time, you’re building up your longer term savings for retirement.
There are certainly a number of ways to make savings more automatic, but you also have to be willing to put forth a little effort to get them initiated.
All of these approaches create some sort of artificial scarcity of money. The general idea behind them is to get the savings money out of mind and out of site before you decide to spend it.

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