Save Your Way to Wealth: Ask a Money Coach
Loop21 and GoBankingRates.com have answers to your biggest questions about saving money.
In theory, saving money is a simple task. All you have to do is set aside a certain amount dollars each payday and keep your hands off, right? If only it were that simple.
Like any good habit, saving money requires discipline, patience and willpower. Loop21 chatted with GoBankingRates.com’s managing editor Casey Bond to find out how everyone can step up in the savings game.
Loop21: Why is saving more important now than ever before?
Casey Bond: Savers are getting less assistance now than ever before; companies are doing away with traditional pensions, the Social Security fund is drying up, and interest rates on deposit accounts are barely above zero. Making a concerted effort to save is crucial for anyone who hopes to retire some day; luckily, the younger you are when you start, the less you have to save each month to reach your long-term goals thanks to compounding interest!
Loop21: What are some easy ways we can trick ourselves into saving more money?
CB: The first is to automate your savings. Whether it’s setting up a regular transfer from your checking to savings account or having your 401(k) contributed automatically taken out of your paycheck, setting your savings on autopilot is the easiest way to save money without having to think about it.
Secondly, always pay yourself first. That means before you set aside a single dollar for rent, bills, or frivolous shopping, you save – even if it’s just a little bit. Saving money is a lot easier when your wallet is full than when you have to decide between a dinner out with friends or a transfer to your savings account.
Loop21: Where is the safest place to save your money?
CB: While it can be tempting to stash cash under the mattress in case of an emergency, the safest place to keep your savings is with a federally-insured bank or credit union. Unlike stocks, mutual funds, and yes, your mattress, money in a savings account, certificate of deposit, checking or money market account should be protected by the FDIC or NCUA depending on the type of institution. As long as your bank or credit union is backed by the federal government, so is your money up to $250,000. Of course, don’t expect to earn much in interest – reward requires risk.
Loop21: How can those living paycheck to paycheck still set funds aside?
CB: Some people live paycheck to paycheck because they’re in a difficult situation where money is incredibly tight, a circumstance that often occurs through no fault of that person. I’m not going to pretend someone who has trouble putting food on the table can build a saving fund if they just try harder. That requires a lot of work and a little good fortune.
However, plenty of Americans live paycheck to paycheck due to what is often referred to as lifestyle inflation: The more you earn, the more you spend. Lifestyle inflation is 100% controllable. Try picking one expense to cut, like premium cable or workday lunches out, and allocate that money toward a savings account instead.
Loop21: So you’ve fallen off the saving wagon; how do you get back on track?
CB: If you stumble, it’s okay. Think of saving money like dieting: just because you had a big slice of chocolate cake today doesn’t mean you can’t go back to counting calories tomorrow. Remind yourself of your goals and their importance in your life and you should have no problem getting back on track.
Casey Bond is the managing editor for GoBankingRates.com, which connects consumers with the best interest rates nationwide on savings accounts, CDs and checking accounts, as well as auto and mortgage loans.
Do you have a money coach? What’s your secret to saving money? Share it with us in the comments below!
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