By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, oneill@aesop.rutgers.edu
Saving money is a frequent topic of conversation for service members during the month of February. Between the receipt of tax refunds by early filers, the America Saves and Military Saves campaigns run by the Consumer Federation of America, and the Save Your Refund contest, many people are promoting savings.
OneOp is sponsoring a free webinar called Savings Strategies for Military Families on Tuesday, Feb. 16 at 11 a.m. ET. The webinar will cover reasons for saving money, including peace of mind and to have cash available for emergencies and future financial goals.
To calculate how much savings is required to achieve a financial goal, divide the amount needed by the time (e.g., number of months) available to save. For example, if you want to save $5,000 by next year, you’ll need to put aside $416.67 ($5,000 divided by 12) a month, or $96.15 ($5,000 divided by 52) a week. Use this worksheet to develop a savings plan.
Many people say, “There’s no way I can save any money!” However, later, they find that they can save when they really put their minds to it. Below are seven saving strategies to get started:
- Pay Yourself First (PYF) – Make saving an “expense” in your spending plan, just like rent or loan payments. To make PYF easy, automate savings through an employer credit union or retirement savings plan or through monthly transfers from a checking account to a savings account or money market fund.
- Continue Paying A Loan – If you’re about to pay off a car loan or student loan, continue making the same monthly payment – to yourself! You are already used to making this payment so you won’t feel deprived.
- Bank A Windfall – Whenever you receive unexpected money – an inheritance, bingo winnings, retroactive pay, an insurance dividend, etc. – put at least part of it into savings.
- Save “Extra” Paychecks – If you are paid bi-weekly, in two months of each year you will receive three paychecks. Employees who are paid weekly will receive an “extra” check in four months of each year. The months vary with each year’s calendar and the day on which you are paid. Save at least part of this money.
- Save Coupon Money – Set aside the amount you “save” by using coupons at a supermarket or drugstore. Your cash register receipt will indicate the amount that was saved. If you save $20 a week using coupons, put the “savings” (the money you did not spend) into savings account. That’s over $1,000 over the course of a year!
- Collect Loose Change – Empty out your pockets and wallet and put loose change in a jar. Then periodically deposit the change into a savings account. Studies show that over three-quarters of Americans have a stash of loose change and over half of Americans add to it regularly.
- Break an Expensive Habit – Every time you don’t buy a donut at coffee break or spend money in a vending machine, save the money you didn’t spend. Ditto for fancy coffee, lottery tickets, and other money “nibblers.”
Successful savers develop a spending plan (budget), include savings for emergencies and future financial goals as fixed “expenses,” and automate savings deposits so they don’t require ongoing self-control, Remember that small steps matter. If you want to save $1,000 in a year, pay attention to where nickels and dimes go every day. For more information about saving money, visit AmericaSaves.org.
