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This article is part of our Better Investor series, in which The Motley Fool goes back to basics to help you improve your returns and be more successful with your investing.
In investing, picking the right stocks, funds, and other investments can mean the difference between ending up rich and wishing you'd had better luck. But as Ben Franklin said, a penny saved is a penny earned, and often, what you do about the money flowing out of your bank accounts every month proves at least as important as how you invest what's left over.
The other side of the coin
So far in this monthlong series of articles, we've focused largely on what to do with the money you've already pegged to invest. With the right combination of strategies that use the full range of available investments, you can do your utmost to maximize your returns and build your nest egg faster.
But before you can invest, you have to find ways to save money, and in a tough economy, that's harder than ever. Fortunately, there are some easy ways to cut back on unnecessary costs and leave yourself more money to buy stocks and other investments.
1. Don't let the banks take your money.
Banks have gotten hit hard twice in the past several years. The run-up to the financial crisis obviously hurt the banks so hard that many of them, including Citigroup (NYSE: C ) , Bank of America (NYSE: BAC ) , and Wells Fargo (NYSE: WFC ) , had to take bailout money from the government. But following the crisis, banks again faced the specter of increased regulation that limited their traditional ways of earning profits.
In response, banks are hiking fees. A recent Bankrate survey found that monthly fees on non-interest accounts rose more than 75%, while ATM fees rose to more than $3.80 for out-of-network transactions. Overdraft your account and you'll cost yourself almost $31 on average.
As a result, it's more important than ever to avoid those charges. Although that's harder than it used to be, checking out local credit unions and smaller banks can show you ways to save while still getting the services you need. In addition, online banks often not only save you on fees but actually pay better interest as well. If you're constantly getting dinged by bank fees, it's worth looking into ways to save.
2. Pay less for big-ticket travel.
Overworked Americans often see their vacations as their chance to cut loose -- and sometimes blow out their budgets as a result. With airfares on the rise, it can be hard to economize and still get to where you're going.
The key, though, is to take full advantage of travel websites like priceline.com (Nasdaq: PCLN ) and Expedia (Nasdaq: EXPE ) . These websites make it simple to assemble packages that include air, hotel, and ground transportation at your chosen destination. And while the "name your own price" aspect of Priceline may seem intimidating at first, it can add to your savings.
3. Ditch the (bad) debt.
Contrary to popular opinion, not all debt is bad. Mortgage rates are lower than ever, making it easy for anyone who has the means to take advantage of bargains in the housing market.
But credit card companies are facing many of the same challenges as the rest of the financial industry. Visa (NYSE: V ) and MasterCard (NYSE: MA ) could see their businesses take a big hit as a result of regulation on debit-card fees and credit card reform. Issuing banks have added annual fees to some of their credit cards on top of the high interest rates they charge. And don't expect any leeway on things like over-limit and late-payment fees.
The ideal situation for credit card holders is not to carry a balance on your cards. In fact, most people shouldn't invest at all until they have their cards paid off, as it's nearly impossible to earn more from your investments than you pay on credit card debt. Getting high-interest debt paid off can save you thousands in interest charges even on relatively modest amounts.
Choosing winning investments may sound a lot more fun than dealing with budgets and cutting unnecessary costs. But with money as tight as it is right now, pinching your pennies can produce huge rewards down the road. By focusing on your biggest expenditures and looking for ways to cut them down to size, you'll go a long way toward getting yourself in position to be a better investor.
Stay tuned throughout our Better Investor series and get the advice you need to succeed with your investments. Click back to the series intro for links to the entire series.