These days it seems almost impossible to even think about starting a savings. With a touch of determination and inspiration it can be done. Here is a review of five simple steps explained by the Federal Trade Commission that can be done by anyone to start saving money.
The first step is figure out how much money you are bringing in and how much you are spending. Write a list of your money making sources, such as paychecks, and side-jobs. Next write down your fixed monthly expenses such as cell phone bills, mortgage payment, and electricity bill. Then make a list of your other expenses such as clothing, haircuts, gifts, and even your daily cup of coffee on your way to work. These small purchases do make a difference. These lists show you how much money you make and how much you spend.
For your second step, set up a method where you give yourself money first each paycheck. This could be as an automatic deduction from you paycheck into a payroll savings plan, or an automatic transfer from your checking into your savings. This step is very important to establish a routine for putting money into your savings on a regular basis. It won’t take long before you see your savings grow with this step.
The third step appears to be a little more confusing, but don’t worry you’ve got this! This step is about compounding interest. According to The Federal Trade Commission compounding interest is “the interest you earn on your initial investment plus all the interest that accumulates over time.” There is simple interest and Compounding interest. Simple interest is when you receive interest on your initial investment only. Compounding interest is the one you want, easy as that.
The fourth step is when you start paying off your debts with your amazing savings abilities. This is when you have some “extra” money, you put it into savings. For example if you get a raise, you take the extra money each paycheck and put that into your savings. Or when you pay off a credit card, take the monthly payment you would have made and put that into your savings. You can have this automatically transferred from your checking to your savings, so you don’t forget.
Being creative about how to save money is the fifth step. You can put any money you saved from this step into your savings account. Save on your haircuts by going to local beauty schools. Often their students will give free or reduced haircuts. You can borrow books, music and DVD’s from your local library for free. Bartering is another great way to save. You have skills and items other people need, they have what you need. It’s free.
Saving money can be easy and fun. You can still enjoy your cup of coffee on the way to work, maybe only do this as a treat once a week. Your savings from automatic bill pay could be dramatic with this one simple step.