Image: Ken Wilcox via Flickr.
One of the biggest obstacles to investing successfully is finding money to save in the first place. Given the severity of the economic recession in 2008, many families are still struggling to make ends meet, and even falling unemployment hasn't given everyone the job opportunities they'd need to make saving easy. Nevertheless, with the help of some simple techniques, nearly anyone can save at least a little more money and get their investing plan moving forward that much faster.
To give you some useful tips on how to save more, we turned to three Motley Fool contributors, who share their experience with their own savings struggles. Take a look at what they have to say and share your own views about saving in the comments below the article.
Selena Maranjian
A key reason that many people don't get around to saving, whether for retirement or other critical needs, is that they don't make it a priority. It's easy to keep putting it off, as most of us have incomes that can seem insufficient for our all needs and dreams, and we often have very little left at the end of each pay period.
Still, your future financial security is no small matter, and it deserves to be prioritized in your money management. One way or another, you have to save significant sums and invest them effectively. It's up to you how you go about doing so. You might, for example, automate your savings by having a hefty sum socked away automatically in your workplace 401(k). You might simply send a big check off to your brokerage or IRA account at the beginning of each month or pay period.
Some people find that they have to "trick" themselves into saving. If that's what it takes for you, go for it. For example, when you finish paying off a car, you might redirect the money you were paying each month to your retirement account -- after all, if you had already been paying that amount for years, then you won't miss the money if you continue to pay it for another purpose. That alone will generate thousands in annual savings. And if you get a $3,000 raise this year, vow to live on your old salary and save that $3,000 -- and do the same for future raises. Social Security alone is unlikely to support you entirely in your old age, so take action now.
Todd Campbell
Socking away money for retirement or a rainy day is critically important, and far too many of us fail to do it. Like Selena said, a tight budget is one of the reasons why people don't save.
If that's the case, then saving money depends heavily on reducing your monthly spending and then shifting those savings to investments. Shopping around for things like insurance is a great way to free up cash in your budget, but tossing away your credit cards and sticking to a cash-only policy is an even easier budget-boosting trick.
According to the Federal Reserve, people with credit cards owe an average $15,609, and according to Bankrate, the average interest rate on a credit card is 14.9%. That means that the average person is forking over $2,328 in interest every year on their credit card debt. Cash-only living will free up more money by reducing your interest payments, and it can also reduce your impulse spending, leaving you more money to set aside. After all, it's a lot harder to part with the $20 bill in your wallet than it is to swipe your credit card.
Dan Caplinger
One of the hardest things about saving money is that people have many different things they need to save for. People can lose sight of far-off goals such as retirement when they're faced with more immediate needs like paying down student loans or making a down payment on a home.
One tactic you can use to make saving easier is to separate all your savings needs into different categories and then allocate your savings across each of those goals. So, for instance, if you can save $100 each month, you might put $25 toward retirement, $50 toward a down payment, and the remaining $25 toward building up an emergency fund for unexpected expenses.
Keeping separate categories might sound complicated, but there are ways to simplify it. First and foremost, you don't have to use separate brokerage or bank accounts to hold different categories of savings -- instead, you can simply keep track somewhere of how much of the money goes toward which saving goal. Of course, sometimes you'll want to separate out expenses, especially for saving in retirement accounts, education savings accounts, or other specialized savings vehicles that carry unique tax advantages. For the most part, though, using a single account to save for everything can free you up to pay more attention to finding the money to save more in the first place.
