Saving Money in a Spending Culture

Sometimes it seems like saving money in today’s world is harder than it ever was before. Insane inflation, low interest rates, and low wages may seem to have conspired to leave you penniless at the end of the month. When the average person subtracts the costs of living from her income, she often finds herself with nothing extra to sock away for retirement or the speed bumps that life tends to dish out. After all, how can you manage to save for a rainy day when you always seem to be in the midst of a downpour?

Cut Down on the Spending

If you’re serious about saving money, there are some simple steps you can take. Examine what you’re spending monthly and what you’re spending it on. You’ll find that you spend more than you realize on unnecessary purchases. According to the Research Division of the Federal Reserve Bank of St. Louis, Americans’ spending on retail and food services has risen steadily since the year 2001 while levels of disposable income rise and fall sporadically. This means that, even when we are bringing in less money, we’re giving more of it to McDonald’s. Stop any unnecessary spending. Junior may be whining for a Happy Meal today, but he’ll be happy he missed it when he’s graduating college.

What to do With the Extra Money

Now that you’re spending less, you’ll find that you have more money left over. What’s the best way to save and grow that money? If you’re starting from scratch, you won’t have enough to consider seriously investing for a while. In the meantime, open a savings account. Savings account interest rates are very low, so this is a short term solution. Set a dollar amount goal and keep depositing the extra until you’ve attained that goal. Make the goal realistic to reach in a short amount of time, but sizable enough to be an amount that matters. Anywhere from one to ten thousand dollars over six months to a year is a good guideline, depending upon your income.

Once you’ve reached the goal, withdraw that amount and invest it in a CD or mutual fund. As that money earns interest over time, continue the cycle with your savings account. Set a second, higher goal with a longer time frame for the combined funds. Before long you’ll need an investment counselor to help you decide what to do with all that extra money!

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