Americans save a little more than 5 percent of their personal disposable income, according to the Department of Commerce’s Bureau of Economic Analysis. It’s not surprising, then, that many people wonder at the end of each month where their money has gone. Don’t despair! There are many easy ways to pump up your nest egg without trying too hard. The Pennsylvania Institute of Certified Public Accountants offers these practical tips.
Straight to saving
Instead of putting your weekly paycheck into your checking account, deposit it into your savings account instead. That way you will have to think about each amount that you transfer into checking to spend. You may find yourself reconsidering some purchases and saving money before you spend it.
Make it automatic
There are a number of ways that make remembering to save easier. First, sign up for an automatic savings option at your bank. Even if you only have the bank transfer a few dollars a week from your checking to your savings account, you’ll be pleasantly surprised at how much you accumulate at the end of the year. Quite a bit of money will build up over time if you sign up for automatic payments to your company’s employee retirement savings plan. Even small, regular contributions can grow into a substantial nest egg by the time you’re ready to retire. If your employer matches some or all of your contribution, take full advantage of the offer. Otherwise, you are turning down a free addition to your future wealth.
Keep records
Impulse spending can be curbed if you have to stop and write down each purchase. Listing your outlays gives you an opportunity to think before acting in haste. It can also help you get a good sense of your financial habits and form the basis of a monthly budget.
Set limits
If you vow to make only one withdrawal from an ATM each week, you’ll learn to budget your money and make your dollars stretch. Another smart step: Use your debit card instead of a credit card whenever possible. When you know that you are making direct withdrawals from your checking account—instead of tapping into a credit line—you will be more cautious about how you spend. Make sure you know if your bank imposes charges for the use of your debit card.
Set aside spare change
Some people have been known to save enough for a down payment on a car or other big-ticket item by taking the change from their wallet each night and dropping it into a cookie jar. It may sound silly, but this technique can help you amass a considerable amount. To simplify the process, many banks have coin-counting machines that will deposit your change directly into your account. If you start now, you may find you have quite a bit saved toward holiday gifts or other expenses by the end of the year.
The reward is in the savings
It can be hard to give up small indulgences, but try to. Bring your own coffee or lunch from home. Take the money you would have spent on takeout and put it immediately into savings. Your growing bank account will be the big reward for the little treats you’ve given up.
Consult your CPA
Setting up—and maintaining—good savings habits is one of the many financial challenges that families face. You local CPA can help. Turn to him or her with all your financial concerns and questions. To find a CPA near you, visit www.IneedaCPA.org.
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