Friday, July 31, 2009

Pick a Savings Sacrifice: An August Challenge

Is there fat or folly in your budget? During the next month, I'm going to carefully examine my spending habits and make a list of areas where I could cut back and save more. It's my August challenge. During the first week of September, I'll publish my areas of weakness and opportunities for increased savings.

The ritual of saving should be sacred during a recession. A survey from Women & Co. shows that "affluent women cited regular savings as one of their smartest financial moves."

Below are some decent savings tips from Women & Co. My favorite is the "savings sacrifice," which involves reflection, honesty and discipline.

"Take a snapshot of your finances. Saving requires you to analyze, plan, organize and evaluate. But first, you need to know the current state of your finances. Start by downloading Women & Co.’s helpful worksheet.

Set savings goals. Slice and dice your savings needs, first into long-term (e.g. retirement) and short-term (e.g. home repairs) goals. Then you’ll be able to better decide how to allocate your money to help you reach them.

Make a “savings sacrifice.” Track your expenses carefully for an entire month and then evaluate them. Are there services or products that you don’t use or can stretch between uses, like visits to the salon or dry cleaning? You may have to make a lifestyle sacrifice for a limited period until you meet your goal.

Save some money monthly. Automatically put a set amount – no amount is too small – of every paycheck in your savings account. Immediately deposit unexpected income such as birthday checks or garage sale proceeds.

Establish an emergency fund. Aim to accumulate enough to cover 3 to 6 months of living expenses at a minimum. Determine as a household what defines an “emergency.”

Pay down debt. It doesn’t make much sense to scrimp to put money into emergency savings if you are carrying high-interest debt. Put money toward paying down this debt first, while still adding as much as possible to your emergency fund.

Invest in your future – before your child’s. If you can’t save for both college and retirement, save for your retirement first. There are other options to fund college – grants, loans, scholarships, etc. – but none for funding your retirement.

Stay up-to-date and involved. The lives and financial needs of women are unique, and can potentially impact our retirement, Social Security benefits, and healthcare expenses. Continue to build your knowledge about your finances and stay up-to-date on the key issues impacting your savings plan. Actively seek out the financial information you need."
--source: Women & Co.


Bobby said...

Nice post. To add to your Pay Down Debt point: If you have several loans, it's a good idea to pay them down in order of interest rate. Pay the higher interest rate first, if you have to choose. Also, if you have large credit card debt, it might be worth a call to your credit card company to see if they'll reduce your interest rate, or even better, your balance (can be effective in extreme cases).

Arlice Nichole said...

These are some good tips.