You’ve heard of the savings crisis in America. You’ve probably even thought, "yeah, I should probably save more.’" But eking out an existence is tough on a starting salary, and sometimes comfort takes precedence over cutting corners. Besides, if you can only save $50 or $100 a month, is it really worth it? The answer: absolutely.
By starting to save now, you’re giving your money—however little it is—time to grow on its own. The magic of compound interest means that you can contribute less money for fewer years if you start when you’re young and still end up with more cash than someone who waits.
For example, if Natasha starts saving or investing when she’s 25, and saves $100 a month for ten years, then lets the money sit, her stash will grow to $174,928 by the time she turns 65 (assuming an 8 percent annual return). If Anna waits until age 35 to start saving, and socks away the same $100 a month for the next 30 years, she’ll have only $135,940 by 65. Anna will have contributed three times as much as Natasha, but will end up with nearly $39,000 less.
Think you don’t have enough money to save? We’ve compiled a list of our best tips to find extra money in your budget to sock away. These strategies won’t require you to take a vow of poverty—we know money’s tight already. Rather, they’re small and simple cost-cutters that’ll help you get started saving as soon as possible.
1. Give yourself a raise and bank it. Boost your take-home pay by adjusting your tax-withholding and have the difference in pay automatically transferred to an online savings account. Most Americans have too much withheld from their paychecks every payday. Correcting that overwithholding by filing a new W-4 form with your employer can create an instant pay raise.
2. Enroll in a 401(k). If your employer offers a 50-cent match for every dollar you contribute, even adding $60 a month will net you over a grand a year. And remember, boosting your 401(k) contribution by $60 a month won’t cut your pay by that much, since pre-tax dollars go into the account. If you’re in the 25 percent tax bracket, a $60 contribution cuts your paycheck by just $45. The other $15 comes from Uncle Sam.
3. Raise your car insurance deductible. Upping your potential out-of-pocket outlay from $250 to $1,000 can save you 15 percent or more off your premium.
4. Pay off your credit card. Carrying a $1,000 balance at 18 percent blows $180 every year on interest that you could put to better use elsewhere.
5. Go green. Control energy costs with a programmable thermostat. Prices start around $50, but you’ll cut your heating-and-cooling bill by 10-20 percent.
6. Bundle up. Getting a package of phone, Internet and cable from one provider can save you about $50 a month.
7. Use your employer’s FSA. Flexible spending accounts let you pay health care and child care costs with pre-tax dollars. If your company offers them, take advantage and save 33 percent or more.
8. Get a credit card with rewards. Spending $80 a week on gas and groceries? Putting it on a card with 5 percent cash rebates will earn you nearly $200 a year.
9. Kick the habit. Smoking is hard on your health and the wallet. Three packs a week averages $50 a month or more.
10. Brown-bag it. Instead of spending $8 on takeout every day at work, bring a bagged lunch for $5. You’ll save $60 a month and $720 a year. Do your own calculation at Feed the Pig.org.
11. Negotiate your rate. Instead of paying an APR of 18 percent on your credit card, call your issuer and ask for a lower rate. If you have good credit, your lender might consider it, particularly if you can cite a better offer you’ve received from another card company.
12. Travel on the cheap. Bypass the old trifecta of travel search engines (Travelocity, Expedia and Orbitz) and head straight for SideStep.com, which will search them all—saving you money and time.
13. Insure yourself. Even if your company has a health plan, you may be able to do better for yourself. Pairing a high-deductible medical policy with a health savings account—which lets you put away pre-tax dollars for out-of-pocket medical expenses—can save money on premiums. Shop around at eHealthInsurance.com.
14. Make media free. Dust off your library card and enjoy DVDs and books for free. If you’d normally rent a movie a week and buy a book a month, you can cut costs by $30 a month.
15. Change your calling plan. The average wireless phone user spends about $60 a month, including taxes and fees. If you talk for 200 or fewer minutes per month, switching to a prepaid plan where minutes cost 25 cents a minute could save you $10 a month. Compare plans at MyRatePlan.com.
16. Park your car. Why pay $25 a week in gas when you could pay half that to use public transit? Or check out carpooling at eRideShare.com and CarpoolConnect.com.
17. Ditch your gym. Forget the $40 a month gym membership that’ll cost you almost $500 a year, and check out community centers in your area. Some may be free or charge a minimal fee, such as $100 a year. Or buy a good pair of running shoes and work out the old-fashioned way.
18. Reshop your auto insurance. Using a comparison site like InsWeb.com can help you determine if you’ve got the best deal. Reshop at least once a year to make sure you have the best deal.
19. Learn to cook. Cooking at home saves on your food budget and it could even improve your dating prospects—who isn’t impressed by someone who can prepare a great meal?
20. Keep track of your money. The best way to save is to know what you spend. It might not be pretty, but detail every expense for a month to get an idea of where you can cut back. Nearly everyone has some fat they can trim from their spending to put toward a savings goal.