How to Save Money

Money, money, money…it’s on everyone’s mind.  I was about to add “lately”, but then again, I’d say money has always been on the brain. 

I have found a few tried and true methods for saving AND making $$ over the years and plan to share them with you.  Some you may have heard before, and this will just be a good reminder.  Others will be new and may sound do-able to you.  That’s the key – it has to be a fit for YOU. 

The method that I’ve found has the best long term results for me is behind the scenes and happens passively.  I don’t ever feel it.

When I get a raise, I opt to automatically deposit a percentage of it into a separate account.  

Here’s how it works:

Almost everyone gets an annual cost of living increase at a minimum, and sometimes you are surprised and get a larger raise with a promotion.  [I recognize the current economy may have disrupted this, but I hope it will revert soon.]

When you get a raise ~ let’s use 3% as an example – opt to put 1.5% into a specific retirement account.  That leaves you with more money to spend that year – 1.5% more – and you will never feel the pain of giving up the other 1.5%. 

You never had it to spend, so your spending habits and lifestyle haven’t adjusted to include it.  Pain free!

I prefer the percentage approach to a fixed amount, because then it is flexible to adjust for hourly workers or short months, etc.

Scenario – you make $1000 per month and get a 3% raise.  If you follow the above suggestions, you will now make $1015 per month and $15 per month will accumulate in  your savings account.  That is $180 per year.  Not too shabby.

Now, this tip didn’t work out for me last year due to the economy.  Our company chose not to give raises.  However, I continue to have 7% automatically deposited into my Roth IRA.   It’s amazing how quickly a % or two each year adds up! 

An added benefit of this approach is that it helps provide an emergency cushion and fund.  For example, my husband was laid off 4 months ago.  I could opt to stop my automatic deposit at any time and get an automatic 7% raise.  7% isn’t anything to scoff at! 

I can also take a loan out against my Roth IRA account and pay it back to myself at 3% interest.  This interest isn’t paid to a bank, it is me paying it to myself.  Kind of cool, huh!

There are certain restrictions on maximum contributions to Roth IRAs and income caps etc.  If you’d like to know more about this specific type of account, please feel free to email me.

What do you do?  Any savvy money tips to share?  Do you think this approach would work for you?

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