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Take a Moment to Tally Your Cash

Don't let it get away!

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Saving money these days is de rigueur. So you might as well make the most of it -- literally. Here are some painless ways to make the money you already have go further.

Find your loose change
Review your current investments, including your work retirement plan, IRAs, and that change jar sitting on top of the dresser.

Start a scorecard
Note interest rates you're earning on your savings. If you own stocks or mutual funds, how do they stack up against the plain old vanilla S&P 500 Index Mutual Fund? Lastly, what are you paying to park your cash? Scrutinize any fees you pay (to your bank, brokerage, fund family). Your goal is to keep all fees below 2% of the value of your holdings.

Don't let your cash crash
Is your savings languishing in an account earning a pittance in interest? If you know you're not going to touch the money for the next six months or longer, stash it in an account that's worth your while. There are several savings options for your short-term cash, including money market accounts, money market funds, Certificates of Deposit, inflation-indexed savings bonds. Not worth your bother? Remember, even just a few fractions of a percentage point can make a difference (use these online calculators to see how much), particularly on savings in the five-figure range and above.

Give your long-term investments a chance
Use the power of the stock market to make your money multiply faster. During the past century, the market has returned an annual average of around 10% to investors. Feeling daunted? An index mutual fund makes an easy way to enter the market. If you've got five years or longer before you need your investment reserves, an index mutual fund may be your first, last, and even only investment you need.

Supersize it
The path to market-beating returns is paved with great company stocks. Once you have a sense of the basics, start evaluating businesses to see whether you have the Buffett touch. And remember, your goal when investing is to keep fees in check, by not overpaying to trade or trading in and out of stocks too often.

Re-evaluate
Take stock of your savings on a regular basis -- at least once a quarter, if not once a month.

Further frugal Foolishness:

This article was originally published on June 18, 2008. It has been updated.

Foolish personal finance expert Dayana Yochim is the author of The Motley Fool's Guide to Couples & Cash. The Fool has a disclosure policy.


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