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New Year’s Financial Resolutions: Save More, Spend Less, Invest Wisely

If you’re like most Americans, no matter how old you may be, you’ve had the importance of saving money drilled into your head ever since childhood.  Even now, as an adult, you can almost hear your parents voicing didactic phrases like, “A penny saved is a penny earned”, “Money doesn’t grow on trees” or “A fool and his money are easily parted.”  As a kid, these platitudes were more annoying than helpful, but grown-ups recognize how right their parents were to emphasize the vital importance of learning how to save.

Of course, understanding the importance of saving your money and actually developing and following a savings plan are two entirely separate issues.  For most Americans, saving money doesn’t come as naturally as we might hope, but there are countless ways to start socking away some cash today.  So figure out what you’re saving for and how much you’d like to set aside, and leave that procrastination behind you — you have no more excuses!

Separate Your Savings Goals

Instead of funneling away everything into one savings account, set up a separate account for each of your savings goals.  You’ll want these funds to be FDIC-insured, so you may need to open a few extra savings accounts at your bank: one for your emergency fund, one for your new-car fund, one for your vacation fund etc.  Any money you intend to save toward retirement, however, should be invested in a different, tax-advantaged accounts, as the yields with traditional savings-only vehicles are too low for a retirement fund.

Set Your Savings on Auto-Pilot

For an utterly hassle-free way to bolster your savings, arrange for your bank to automatically divert a predetermined dollar amount from each of your paychecks into a savings account (or a few savings accounts).  You’ll be surprised how quickly funds add up, and since it’s an automated process you needn’t lift a finger.  For example, if you get paid twice a month and you have your bank automatically deposit $100 from each paycheck into your savings, in a year’s time you’ll have saved $2,400 — and that’s before accounting for any interest you may have accrued.

Give Yourself an Allowance

Instead of pulling out that well-worn debit card whenever you get the urge, withdraw a small amount of cash to pay for your weekly incidentals.  These will vary from person to person and even from week to week, but might include things like a morning coffee, lunches or dinners out, treats and impulse buys.  Stick to your guns — once your “allowance” is gone, it’s gone until next week.  If you can see the financial impact of these purchases, you’re less likely to spend your hard-earned money.

Reassess Your Home and Auto Insurances

Taking the time to shop around for better rates on your homeowners and auto insurance sounds tedious, but spending even as much as just half an hour comparing rates each year could save you hundreds of dollars, so it’s certainly time well-spent.  The reason you should make this an annual task is simple: auto and home insurers readjust their pricing annually based on their claims history.  You should also explore the possibility of using the same carrier to insure both your home and your vehicle, as most insurers offer a discount (which can be as much as 15 percent) for doing so.

Round Up

Every time you make a purchase with your checkbook or debit card, when you make a record of the transaction, always round up to the next dollar.  For example, if you spent $11.39, you’d round up to $12; if you spent $3.04, you’d round up to $4.  At the end of the month, total up the difference (or in this case, discrepancy) and add it to your savings account.  All those pennies really do add up, so it’s a strategy worth trying.

Reward Thyself

Reaching one of your savings goals, no matter how large or small, is always an accomplishment, and one worth celebrating, at that.  When you first sit down to develop your goal, decide how you plan to reward yourself for reaching it.  Try to make the value of the reward commensurate with the amount of time and money you’ve saved.  Did you finally pay off that department store credit card?  Go ahead and buy those shoes or the nine-iron you’ve been eying — just be sure to use the cash you’ve saved to make the purchase, not a credit card.  Don’t go overboard, or you’ll simply defeat your savings efforts.

The time to start saving more, spending less and investing those savings wisely is now, so try implementing some of the strategies listed above. The money you save by the end of the year will be well worth any short-term anxieties implementing a savings plan may produce.