It seems almost impossible these days to find ways to start a savings. With a bit of ingenuity and effort it is possible to do. Here is a review of five simple steps given by the Federal Trade Commission that are easy enough for anyone to start a savings.
The first step is to have a clear picture of how much money you are making and how much you are spending. Make a list of your income sources, such as weekly paychecks, and odd-jobs. Next write down your fixed monthly bills such as electricity, cell phones, and mortgage. Then create a list of other costs such as haircuts, clothing, gifts, even your daily coffee on your way to work. Small purchases do count. This will give you an idea of where your finances are at.
The second step is to set up a schedule where you pay yourself first each paycheck. You can set up an automatic deduction from you paycheck into a payroll savings plan, or an automatic transfer from your checking into your savings. This step is to ensure you created a routine for your savings. With just this step you will see your savings start to grow.
The third step is a bit intimidating, but don’t let that worry you. It’s not difficult. This step is learning 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.” For savings accounts there are simple interest and Compounding interest. Simple interest is when you earn interest on your initial investment only. You want compounding interest. It’s that easy.
The fourth step is how to save when you start paying off your debts. This is your “extra” money that can be put directly into savings. For instance, when you get a raise, the extra money each paycheck goes directly into your savings. Or you pay off a credit card, the monthly payment you would have made also goes directly into your savings. To make it easy you can have this automatically transferred from your checking to your savings.
The fifth step is all about being creative in ways to save money. The money saved you can put, you guessed it, into your savings account. Ways to save include going to local beauty schools to get your hair done. Often students will do this for free or at a reduced cost. Also, your local library has free books, music and DVD’s you can borrow. Another way to save is by bartering. You have skills and items that other people need, and other people have skills and items you need. It’s fun and free.
Finding ways to save money can be easy if you just set your mind to it. You can still enjoy your coffee on the way to work, try doing it once a week as a treat. You could be saving yourself over fifty dollars a month with this one simple step.