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By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, [email protected]

How do most U.S. households, including military families, become wealthy? A small number receive lump sums such as life insurance benefits, settlements, and inheritances. Even fewer win the lottery or some other big cash prize. Most people who become millionaires do it the old fashioned way: they earn money, live on less than they make, save money, and earn compound interest over time.

Military Saves Week, a campaign that seeks to motivate military families to save money, is scheduled to run from Feb. 24 to March 1. Through the Airman and Family Readiness Center at Langley Air Force Base, Va., and the Army Community Service at Fort Eustis, Va., service members can utilize the program and its resources to help them achieve their financial goals. (U.S. Air Force photo by Airman 1st Class Areca t. Wilson/Released)

U.S. Air Force photo by Airman 1st Class Areca T. Wilson

So how do people live below their means and find money to save? They spend wisely because they know that every dollar counts. An example is buying packages of water and soda on sale instead of buyng expensive bottles from vending machines. Add up what you’re spending on “little things.” If you can “find” $5 per day from reduced spending, that adds up to $1,825 in savings per year, and even more with interest.

Below are specific ways to reduce spending to free up money to save:

  • “Crash” Save- Decide, for a month or two, to buy only absolute necessities and save the difference for emergencies or short-term financial goals.
  • “Brown Bag” Your Lunch– Prepare lunch at home to take to work on most days, instead of eating out. Leftovers from dinner can become lunch the next day, saving hundreds of dollars annually.
  • “Step Down” Your Spending- Buy food, clothing, and other items at reduced prices. For example, when buying clothing, step down from high-end to moderately priced department stores to discount stores, factory outlets, consignment stores, and thrift shops. The more steps down, the greater the savings.
  • Plug Spending Leaks– Add up what you’re spending on “little things” such as snacks, coffee, soda, candy, fast food, lottery tickets, magazines, take-out dinners, alcoholic beverages, and more. If you can “find” $5 a day from reduced spending and save it, that adds up to $1,825 per year and even more savings with interest.
  • Find Perks– Take advantage of rebates, discounts, and/or wellness incentive programs provided through your employer. Talk to your boss or human resources office to find out what benefits your company offers.
  • Quit Smoking or Don’t Start– Find money to save by kicking the smoking habit. Assume a pack of cigarettes costs $7 with taxes included. Multiply $7 by 365 days and you could save $2,555 a year, plus interest (not to mention all of the positive health effects!).
  • Cut Home Energy Costs– Check weather stripping and caulking for leaks, upgrade attic insulation, shift laundry and dish washing to “off-peak” hours, and turn the thermostat down a degree or two.
  • Get a Good Plan– Choose a cell phone plan that meets your needs (e.g., number of monthly minutes and texts, data usage, number of linked callers) or use low-cost prepaid telephone calling cards as needed.
  • Find Freebies- Seek out free or low-cost community resources such as summer concerts, health fairs, state parks, rabies clinics for pets, and inexpensive adult education classes offered by Cooperative Extension.

When you spend more than you earn, you are living beyond your means. This makes it difficult or impossible to save. To turn this situation around and achieve positive cash flow (income greater than expenses), find ways to trim spending. Variable expenses that are not locked into a fixed monthly amount (e.g., food and entertainment) are usually the easiest expenses to cut. For more savings information, visit America Saves.