That’s not that hard to save money. What’s important is to keep the money saved.
Cutting expenses in one area is too easy only for spending more elsewhere. Sticking cash into savings will not help if it returns straight out again. There are a few ways you need to trick yourself into saving money that actually lasts.
Here are 5 ways to save money safely.
1. Automate Your Savings
Willpower is overrated. Set up automatic transfers, and you likely won’t miss the money as it’s whisked from your paycheck to your retirement fund (for example) or from your checking account to savings.
2. Hide Your Accounts
Part two of the out-of-sight, out-of-mind approach is to ensure that you are not regularly reminded of having that money.
Set up savings accounts from the one that has your checking account at a separate institution. Therefore, you don’t see your savings balance every time you log in.
3. Name Each Savings Account
It can be a powerful deterrent to tapping the money for other uses to mark an account with its intent.
Online banks allow you to set up several sub-accounts at no extra expense, and you can give each one a name: vacations, property taxes, new car fund, vacations, and so on. Diving into a nameless savings account is a lot easier than having one that says “Dream Trip to Bora Bora.”
4. Lock Up Your Funds
For small emergencies, you should keep at least $500 in cash easily accessible. Consider, in addition, creating certain barriers to accessing the money.
Deposit certificates can be a good choice for savings accounts, but if you dip into them early, you pay a small penalty. If you are tempted to cash in retirement savings, note that usually taxes and fines would be equal to 25 to 50 percent on any withdrawal.
5. Make It a Game
Some people save every $5 or $10 bill that wanders into their wallets. Others stuff every $1 bill they get into a change jar at the end of the day. Every month, feed the green to your savings account.
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