Tips on How to Save Money

It's important to put aside a portion of your paycheck each month for both short-term and long-term savings. Short-term savings is money you use for things that come up suddenly. Auto repairs, medical expenses, or vacations are examples of how you would use short-term savings. This money is available in case you lose your job.

It is far better to use accumulated cash than to charge these emergencies on your credit cards.

Long-term savings would be your retirement or college funds. This is money you don't touch. Instead, you put away portions of your salary for those financial goals you have set for yourself.

Getting started

You should save approximately 5 to 10 percent of your income for long-term goals and have at least three to six months of emergency funds set aside "just in case."

Here is how you begin to realize these dollar amounts.

1. Develop a budget. Sit down and determine how much money comes in each month and how much money goes out. Make sure you include everything. Write down all your monthly costs including what you spend on dry cleaning, utilities, mortgage or rent, insurance, car payments, groceries, gas, and telephone. Don't forget entertainment and restaurants either. Take your time and carefully assess your entire financial picture. If you find that you are spending too much each month and leaving nothing left over, begin scale back on certain items you don't need. Stop spending so much on entertainment or eating out. Seriously reconsider your cable service and whether or not you really need satellite radio. Once you have developed a responsible and reasonable budget you with enough money set aside to pay off credit cards and to put in savings each month, you will be able to stick to it.

2. Wait before you make a major purchase. Stop impulse buying and learn to go to the mall, mass merchandisers like Target, and other stores without getting anything. Take your time deciding and shopping around, always comparing prices and looking for good deals. Visit websites where you can get things for free or at a discounted price. If, after a month of shopping and thinking about it, you still want to purchase that big screen television, then go ahead. Hopefully you will be comfortable getting the item at that point because you've determined you can afford it.

3. Limit yourself on certain items that are expensive and unnecessary. Going to the movies, eating at fancy restaurants, and visiting Starbucks every morning are not essentials and yet treating ourselves feels good. There is nothing wrong with a treat every once in a while. Take the money you have responsibly allocated toward such treats or special occasions each month and put the money in envelopes or folders with labels like "Movies" or "Eating Out." When the folders or envelopes are empty, that means those events are done for the month. This helps you to set limits, resist overindulging, and yet enjoy monthly treats all at the same time.

4. Take advantage of electronic funds transfers. Visit your employer's payroll department and if they offer automatic deposits, sign up for them. You can choose how much of your paycheck gets deposited into your checking account and how much gets deposited into savings. This helps you because the bank makes the deposits before you even see the money. This also allows you to concentrate only on what goes in and out of checking. You can't miss what you don't see; therefore let technology work for you. Then you aren't even tempted to spend that allocated amount, it just automatically goes into savings where it belongs.

5. Start small and make little changes every day. This often helps just as much if not more than the big changes. Take public transportation twice a week instead of driving to work. Carpool another day. Iron your own shirts instead of sending them out to be pressed. Rent a movie instead of hiring a babysitter, driving to the theatre, and paying those nighttime charges. If you change just one or two things a month, you can save a great deal by the time a year has passed. Every little bit helps. Some more changes to consider: Collect change and put the extra coins in a jar somewhere in the house. Sell items you no longer use on websites or hold garage sales to get rid of them. Take the money from the jars and the garage sales at least once a year to the bank and split the money into thirds. Take one-third and buy the family a treat. Another third can be used to pay down a credit card or some other debt. The final third goes into savings. Also, use the two extra paychecks every year toward paying down the principal on your mortgage. This is a way of paying off your mortgage sooner and contributing toward long-term savings at the same time.