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Saving Money – How to live on a budget
August 14, 2005
By: A.Retlick

Disclaimer: The author is not responsible for any negative feelings derived from reading this document. The contents herein may not be used in any form without written permission from the author.

This article isn’t specifically related to the Internet, but it does contain information on how to use technology to save money. Last week I read a story in the newspaper about how Americans are not saving enough money. We are setting aside less money now then at any time in history. How did we get into this situation? And why is it a problem? Well, just like any social problem, there are a number of factors that contribute to the trend. I suspect that the American marketing engine that bombards us with advertising drives a lot of the spend mentality. But there are other factors too. Many of us simply have less money left after the end of the month to put away into a savings account. Through downsizing and sending jobs offshore, many Americans are now working at lower paying jobs. Taxes and general living expenses have increased faster than our wages. We may also be subconsciously looking at the future and feeling that, if we don’t spend it now, it will all go for healthcare. We are always just one doctor visit away from some major illness and almost everyone knows someone who has died before they reached retirement age. Many employers can no longer provide good healthcare coverage forcing employees to pay larger amounts out of our own pockets.

With all of that going on, it’s easy to understand why so many of us are not saving money for the future. We know we have social security and Medicare to cover us if we live long enough to need assisted care. So why deprive ourselves by saving money that could make us ineligible for social programs later? Sure, there are ways to protect savings from government penalties, but it takes professional help and years of planning. I’m not an expert on the subject and I may have this all wrong. But we now have several generations that have not lived through the depression. People from that era were so financially devastated that the government had to guarantee that their savings was protected before they put money in banks again. My grandfather lived through this time period. He took saving money to the extreme. After he retired he continued saving and investing. He would only spend money on things that were absolutely necessary. I’m sure the money gave him a sense of security. He could have spent it as he grew older, but that would have put his feelings of financial security at risk.

I’m afraid I may have a little of my grandfather in me when it comes to saving money. I have lived through the dot-com bubble of 2000 and I find myself a more conservative investor because of it. So is it wrong to put money aside? Only the future will tell for each of us. Either you are a saver or you are not. But I don’t think the same incentive is there for us anymore. Interest rates under two percent do not encourage people to save. Many of us are placing our extra income into our homes because property values are increasing faster than any other investment. How you manage your budget has a lot to do with how much you can put into savings. Here are a few tips for saving money.

# Get rid of all your credit cards and get a check card. A check card looks just like a credit card, but your credit or spending power is limited to the size of your checking account. Most banks will provide you with a free check card if you have a checking account with them.

# Shop around for the best CD rates. Small independent banks generally provide the best rates. One trip across town can put hundreds of extra dollars into your pocket over time. When your CD matures call your bank to see if they have any specials going on. Many times you can move your money into a new CD with a better rate, rather than taking the automatic renew rate.

# If you must invest in the stock market, participate in your company 401k if they have one. Put regular amounts of cash aside each month into a mutual or bond fund that pays dividends. Don’t speculate in a stock unless you have done your homework and there are compelling reasons that will drive the stock price higher over time.

# Pay your bills online. Most banks now have a free online bill pay service. You can setup automatic payments with most businesses that provide you with a monthly bill. This will save time and stamps.

# Run your household budget like a business. Don’t spend more than you make. Check your bank statement each month and subtract your deposits from your expenses. If your expenses are larger than your deposits you need to cut back on spending. The goal should be to come out ahead every month. But of course that isn’t always possible.

# Try to minimize recurring expenses. Ask for a larger deductible on your auto insurance. Go out to eat less often. Shop for food with coupons. Rent movies instead of going to the theater. Plan your trips and drive your car only when you need to. Buy clothes only when they are on sale. Buy household items in bulk or at a discount store.

Analyzing all of your expenses can be a real interesting project when you have a family. It will be difficult to change some spending habits. But it needs to be done. Americans have a lot of expensive hobbies these days and cutting back is no fun. I’m sorry if you’ve heard all of this before. If you can’t relate, then you probably have a good paying job and money isn’t a problem. But there are many Americans who are in financial trouble because they spend more than they make. I’m still hoping to win the lottery someday. But with my luck I’ll win when I’m too old to enjoy it. For many of us, the American dream is to retire early. That isn’t going to happen unless you start saving and making smart investments when you are very young.

-AR-