Spur Savings into High Gear
Just for fun, let鈥檚 play a game called 鈥淲ould You Rather.鈥� Would you rather be given $5 every day for the next 40 years or receive a lump sum of nearly one million dollars 40 years from now? Of course you picked the lump sum, right?
These numbers aren鈥檛 random. If you save and invest $5 a day for the next 40 years at a 10% return rate, you鈥檒l have $948,611! That鈥檚 a nice chunk of change. This scenario sounds like a no-brainer, yet many students put off saving for their future so they can have more money to spend today.
Saving money isn鈥檛 as hard as it seems; it just takes commitment. Below are some tips to help you save money and be well on your way to millionaire status by the time you retire.
Pay yourself first. One of the most important rules of saving money is making it a priority. Each pay period, have money automatically transferred from your paycheck to your savings account. Direct deposit makes saving simple because you won鈥檛 miss what you don鈥檛 see. You鈥檒l be amazed how quickly your balance can grow.
Adjust your withholdings. Make sure your W-4 form is filled out to your best advantage. File a new W-4 anytime there鈥檚 a major change in your life, like a marriage, the birth of a child, or the purchase of a home, all of which can affect the amount of tax you鈥檒l eventually owe. Make sure the money you just spared from the IRS isn鈥檛 spent; put that extra money into savings!
Cut corners. If you save $30 per week by bringing your lunch to school or work, put that $30 into savings; the same goes for making your own coffee and smoothies or using Groupons. Like movies? Catch the matinee at discounted prices or subscribe to streaming services and deposit the difference in your savings account.
Reduce monthly fees. Monthly fees can add up to hundreds of dollars per year. Eliminate services that you pay for but don鈥檛 use, like premium cable channels, gym fees, or warehouse market memberships.
Put away windfall money. When you earn a raise, get a refund, or receive a cash gift, invest the money or put it in your savings account. You know you can get by without it now, so put the money to work for you. It will be worth even more later.
Keep making payments. If you鈥檙e currently making loan payments, when you鈥檝e paid the balance in full, use that money to make regular contributions to your savings account or investments. Since you鈥檙e used to being without the extra money, you won鈥檛 miss it!
Build an emergency fund. Stash enough money to cover small emergencies; if you only work part-time, aim for about $1,000. Have a full-time job? Try to stash away three months of living expenses. An emergency fund will provide a cushion for any unexpected situations, so you won鈥檛 have to rely on credit cards or payday loans.
Keep your eyes on the prize. Whether your goal is paying next semester鈥檚 tuition, taking a vacation, buying a car, or making a down payment on a house, remind yourself regularly why you鈥檙e saving. Post reminders and pictures that represent your goals on the refrigerator for inspiration and congratulate yourself as your bank or investment balance grows.