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Your work pays your bills. That’s its first job You need to earn enough to pay the rent, put food on the table, and keep the lights on.
After you’ve met those essential obligations come other, near-essential expenses: a car, insurance, entertainment.
As earnings increase the first change is in the quality that those expenses bring. The apartment becomes bigger. The food becomes better. The car is newer and shinier. Entertainment stretches from a cinema and popcorn to a trip to Cancun.
At that point, the issue of how to spend money changes. Once you can afford to make choices, one of those choices becomes not spending money. You can put it aside and save it for a rainy day. That money-saving switches from a luxury that would be nice to have to an essential that any responsible adult makes sure that they have.
Spending money is easy. There’s no shortage of stores and advisors keen to offer advice about how to spend your money and what to spend it on. Saving money, though, is harder. A survey by FINRA, a financial education foundation, found that almost one in five Americans spent more than they earned in the past year, and almost half lack a rainy day fund. Thirty-five percent of people with credit cards paid only the minimum during some months during the last year. It’s a choice that allows expensive debt to build. Most worrying of all, little more than one person in three was capable of correctly answering four out of five questions on a basic financial literacy test.
The test asked simple questions about the cumulative effect of interest rates, inflation, and mortgage rates.
The lack of financial education is scandalous but perhaps it’s not surprising. While most states now offer—and some even require—a financial literacy course for high schoolers, the lessons can feel moot. For teenagers without an income (and without expenses), let alone savings, talk about the relationship between interest rates and bond prices can feel academic. When they’re counting their dimes so that they can buy a new video game, long-term savings plans and investment strategies just aren’t important.
By the time that savings information does become important and relevant though, it’s too late. There are few ways for adults to obtain the financial literacy they need. The result is that too many people don’t know how to save.
And yet, saving money is one of the most important activities adults need to perform.
Saving money isn’t a luxury. It’s something that everyone must do once they can afford to pay the rent and feed themselves and their family. There are five reasons for putting aside money from each paycheck, and keeping it safe.
The most important reason to save is to ensure that you have a safety net. Outgoings are guaranteed. You’re always going to have expenses. You’ll always have to eat and find shelter.
The same though isn’t true of income.
Your employer could suffer cutbacks. Your clients could end their relationships. You can lose your job at any moment. And you have to assume that you will.
Unless you have a guaranteed income from some other independent source, you have to live with the assumption that at any time, your income could stop. And it might not start again for a long time.
According to figures from the Bureau of Labor Statistics, the median duration of unemployment between January and May 2021 ranged between 15.3 and 19.8 weeks. Less than a quarter of people who were looking for work in April 2021 had been unemployed for less than five weeks. More than 55 percent had been unemployed for at least 15 weeks, and 43 percent for at least 27 weeks.
That’s half a year without an income. Or to put it another way, almost half of unemployed people in America in 2021 had been without work for at least a week longer than the maximum unemployment compensation program.
There’s no question that Covid-19 made it harder than usual for people to find new jobs in 2021, but how long could you last without an income? Are you confident you could find a job before your benefits run out?
Save money each month, and you’ll have the cushion you need to see you through a sudden loss of income. You won’t need to beg friends or family for help, and you won’t need to take the first job that comes along to be sure that you can pay the rent.
In 2018, a paper from the Federal Reserve reported that 40 percent of American adults would not be able to cover an unexpected expense of just $400. Either they’d have to borrow the money or they’d have to sell something. Or they wouldn’t be able to cover the cost at all.
That means that almost half the adult population of the US are just one fender-bender, veterinary bill, or broken boiler away from a serious financial problem. And those are things that happen every day.
What makes unexpected expenses unexpected isn’t that they happen. It’s when they happen.
If you’re driving an old car, something will eventually go wrong. If you have a pet, it will be sick and old one day. Homeowners know that washing machines eventually break down. Computers become slower with age. Mobile phones get lost or stolen.
You can’t know when those sudden expenses will hit you. But you can expect that they’ll hit you one day. You need to be ready when they do. You need to have enough set aside so that unexpected costs don’t knock you down. They might be painful and annoying but they’re a part of life.
Buying your own home isn’t right for everyone. Renting property can increase mobility: it’s much easier to take a higher-paid job on the other side of the country if you don’t have to sell your home first.
Renting can shift many of the responsibilities for the building onto the property-owner: leaky roofs and termite nests might be your problem but someone else has to implement the solution. And owning a home isn’t always a great investment. Homes have expenses, and property prices don’t always rise. The money that you put in the walls might do better somewhere else.
But there are plenty of advantages to owning your own home too. Instead of paying rent to someone else, most of your mortgage payments stay with you. You’re not at the mercy of a landlord who doesn’t have your interests at heart. And above all, the property is yours. It’s your home.
Before you can put a foot on the property ladder though, you have to save. The minimum you can get away with is about 3.5 percent, but more realistically you can expect to have to save at least 5 percent of the price of the property, and usually much more.
And you should pay more. The bigger the deposit you pay, the less interest you’ll have to give to the bank.
If you’re planning to own your own home, you will need to save—both to buy a better home, and to buy that home for less money.
The money you save will see you through bad times and ensure that you make it through emergencies. You’ll also need to save to buy those big items that require large down payments. But at some point, you’re doing to want to stop earning money and focus entirely on enjoying yourself. You’ll want to retire.
Putting money aside for your retirement must be an essential part of your saving plan. It might not feel like a part of a saving plan. You’re not saving money that you’re going to be able to use any time soon. In fact, most retirement plans will impose both taxes and penalties if you crack open the account early. But you are choosing not to spend money today in order to be able to spend it one day in the future—when you need it more.
The good news is that saving for retirement is easier than other forms of saving. There’s no shortage of plans, from 401(k)s through annuities to IRAs, that make saving automatic and even tax deferred. The key is to make sure that you’re signed up to at least one plan and that you’re making the most of the opportunity that saving for retirement offers. Sometimes, you can even increase your salary by agreeing to save more for the future. If your employer offers matching contributions, you should take all of the contributions on offer. Anything less is leaving money on the table—and in the hands of your employer.
The difference between those with wealth and everyone else is that while everyone else works for money, the wealthy let their money work for them. They put money aside every month, invest it, and let compound interest do its thing.
Let’s say you started with $100 from your first job. Each month, you save another $100 and you put it in an investment plan that pays 5 percent a year. After 20 years, you’ll have saved $24,000. But the effect of compound interest means that you’ll actually have $41,374 in your account. You’ll have saved $100 every month and that money will have earned $870 every year. After 20 years you’ll be more than $17,000 better off.
Making that compound interest isn’t as easy as it used to be. Interest rates are low at the moment. A savings account at the bank won’t pay more than 0.05 percent a year. That’s lower than the rate of inflation so there’s little sense in putting the money there, other than to keep it safe. But there are other options from bonds and shares to real estate and retirement funds.
They each have their advantages and disadvantages, and they each come with their own set of risks. You’ll have to weigh up those risks as you come to make your decisions. But what they’ll all do is make sure that your money works for you so that you can work less for money.
This guide is not an investment manual. We’re not qualified to provide investment advice or tell you where to put your money. What we can do is tell you how to save your money, and suggest some places you can put it when you save it.
Before you invest your savings, though, you should take professional advice.
We’ve divided this guide into two parts.
In the first part, we talk about strategies for saving money.
Putting cash aside each month isn’t straightforward. It requires discipline and a habit, an awareness of how much you’re spending, and an understanding of the benefits of saving.
We’ll talk about how much you should save and how to track your spending so that you don’t save too little. We’ll discuss debt because owing can be the opposite of saving. There are some debts that you will need to clear before you can start creating a surplus.
We’ll also explain how to make cuts that will increase your pot, and set a goal to meet your target.
In the second part, we’ll discuss some of the places you can put your savings so that they grow. We don’t offer an exhaustive list or try to tell you which are the best places for you. Everyone’s priorities will be different. But we do want to show the breadth of the different options available once you have savings set aside.
If saving money was easy, everyone would be doing it. It isn’t easy. When you’re earning a low wage, it’s hard enough to make ends meet. You’ll always have to make rent and buy food, and there’s no shortage of other things to buy if only you had the money to buy them.
As your income rises, you can afford to be a little more generous with yourself. You might rent a bigger apartment or buy a newer car. You’ll eat out more often and treat yourself to a better phone. You’re earning more money but the month still feels longer than your pay.
High earners have the kind of expenses that make other people’s eyes water. The payments on a top-end car can cost more than many people’s rents. The cost of just running a big house can take a large chunk out of an average person’s salary—and high earners often have more than one house. Vacations suddenly have to be taken abroad, in five-star hotels, after flying business class at the very least.
Earning more doesn’t just open opportunities to save more. It also provides opportunities to spend more. What used to look like a luxury starts to look like a minimum, something you can’t live without. There’s always more to spend money on.
Your house can always be bigger. Or you can buy another one. Vacations can always be longer, more adventurous, and more luxurious. Clothes can always come with flashier labels.
People who don’t save believe that if they just had a little more money, they would save. They’re wrong. If they had a little more money, they’d spend more money. The ability to save isn’t directly connected to the amount of money you earn. It’s connected to your desire to save and your willingness to make the sacrifices needed to save.
Because saving requires sacrifices. It means being willing to put aside the fun that your money will buy now in favor of the greater security that your saved money will buy now—and the fun it will buy in the future.
Saving is a decision. It’s a choice you make today to plan ahead and prepare for tomorrow. It’s a smart choice that you don’t have to be rich to take.
As long you’ve got a roof over your head, food on the table, and clothes on yours and your family’s back, you can save. You’ll save more if you earn more, but you can still save even if you only earn a little.
So saving means making sacrifices. But how big a sacrifice should you make? How much should you restrict your life now in order to build security, or save for a big expense, or build your wealth for the future?
Save too much, and you risk living like Scrooge: hoarding your wealth, never spending it, and never enjoying the benefits that money can bring. Save too little and you lose your security. You live from pay check to pay check. You’re never able to make a down payment on a house or build wealth that can work for you.
There’s no right answer for everyone. It’s relatively easy to cut fat from your budget when your budget includes first class plane seats. It’s much harder when you travel choices are the bus or foot. But there is a formula that you can use.
In general, financial experts recommend a 50/30/20 rule.
Half your income should go on necessities such as rent and food. Thirty percent should be discretionary. You should save 20 percent.
So someone earning $50,000 a year after taxes would spend no more than $25,000 a year on rent and food. They would spend a maximum of $15,000 on shopping and entertainment. And they would save the remaining $10,000.
How hard you’ll find it to keep to that formula will, of course, depend on how much you earn. According to the USDA, the average American spent 9.5 percent of their disposable personal income on food in 2019 but the share varies considerably by income quintile. People in the lowest income quintile spend as much as 36 percent of their income, or $4,400 a year, on food. People in the highest quintile spend almost four times as much at $13,987, but that represents just 8 percent of their disposable income.
The definition of “necessities” and “discretionary” spending can very too. A car is a necessity for many, but not for everyone. Saving can take many forms as well. If your employer is paying into a 401(k) plan for you, then you’ll already be contributing towards that 20 percent savings rate, even if you can’t feel it. If your employer has a matching contribution plan then each additional dollar you put into your retirement pot will bring more of your employer’s money.
So one way to think about the amount you need to save is to think of a percentage of your post-tax income. Aim for 20 percent, including your retirement contributions. So if you’re earning $50,000 after taxes, you should be saving a total of $10,000 each year. Some of that money will be going into your pension pot before you’ve paid tax on it. The rest will be adding to the funds in your savings account.
The problem with saving a percentage of your income is that your income can change. Sales people, for example, often work on a bonus structure. It’s too easy for them to save a share of their basic salary but treat the rest of their income as extras that they can enjoy. Those extras could well make up the bulk of their income.
But bonuses are also unreliable. Even the best sales people can go through dry patches, and average sales people can sometimes land a big deal that they never repeat. That unreliable income can make for unreliable savings plans.
An alternative approach is to set a financial goal. That’s easier to do if you know exactly what you’re going to use that money for. If you plan to save $50,000 for a house deposit, for example, you could calculate that putting aside $500 a month would take you 100 months, or just over eight years. Tighten your belt and double your saving rate and you could be in your own home in a little more than four years.
The vision of your target should help you to maintain your discipline.
But maintaining a savings discipline over the long term is always difficult, which is why financial experts often talk about short-term, mid-term, and long-term savings goals.
Short-Term Savings Goals
The aim of a short-term saving goal is to show that saving works. It’s a way to build confidence and motivation for longer-term savings. It also shows you that saving can be easy.
As we’ll see in the next section, tracking your budget is important, and it’s a good place to begin when you’re setting a short-term financial goal. When you can see that you’re spending four bucks each workday on a Frappuccino at the local Starbucks, then you can see that making do with the coffee machine in the office kitchen will save you $20 a week. That’s $80 a month in your pocket at the end of the month just by swapping expensive coffee for free coffee.
Add in the restaurant food you order three times a week instead of cooking up a simple pasta dish at home or dessert in the restaurant that you could easily skip. You could quickly find yourself with an extra $250 each month. That’s an instant pay rise for very little effort.
When you see that extra money, you’ll quickly see that saving really does have some important, positive consequences. You’ll also see that if you keep going, you can save even more and make a real difference to your lifestyle.
Most importantly, it won’t be long before you’ve built an emergency fund of a few thousand dollars. If you can use your short-term savings goals to save enough money to last a few months without pay, you’ll have a valuable degree of security. You won’t have to worry too much if you suddenly lose your job or find that you’re unable to work. Nor will you have to beg from friends or turn to family.
You will have time to get back on your feet, on your own.
Mid-Term Savings Goals
You should be able to see the result of a short-term savings goal within a few weeks. By the end of the month, you’ll find that you have more money in your pocket than you expected. After a few months, you’ll feel the confidence that comes with greater security.
At that point, you can start thinking about your mid-term goals.
These will vary from person to person. They’ll depend on your status and the financial position from which you start. Your medium-term goal might be to save enough to clear your student debts or make a down payment on a house. Or perhaps you’re saving enough to set up a business.
At this point, you need to do more than simply not spend more than you earn. You need to start putting your money to work. Those savings might be sitting unused for several years. That’s time that inflation will be eating into their value. You will need to protect them.
Later in this guide, we’ll talk you through the range of savings vehicles that you can use to store your savings but this is the time to start looking into them.
One of the biggest issues surrounding personal finance is that when you don’t have spare cash, knowing what to do with your savings feels irrelevant. It’s information that other people need—people richer than you. But when you do have savings, it’s too late. Inflation is already reducing their value and the opportunity cost of not investing them is reducing revenues.
It’s while you’re saving for the medium term that you can start to square that circle. As your savings build, start investigating different savings accounts and different investment vehicles. This is also the time to understand that saving vehicles have different maturation periods. The longer that you’re willing to lock up your money, the more interest you can expect to receive. But if you’re saving for a mid-term goal you won’t be able to benefit from all of the advantages available to long-term savings.
You won’t be able to enjoy the tax benefits, for example, that come from contributing to a 401(k) plan or an IRA. You also won’t be able to enjoy all of the returns that come from holding a bond all the way to maturity.
But you will be able to lock up your funds for a limited time, and enjoy some of the benefits.
Estimate how long it will take you to reach your mid-term goal—whether that’s a deposit for a house, or a fixed sum to open a store. As you put money aside each month, remember to invest that money for a period no longer than the date of that goal. You should find that your savings grow faster, and you reach your goal sooner.
Long-Term Savings Goals
When financial advisors talk about long-term savings goals, they’re usually talking about retirement. They’re referring to the day you close your last folder, hang up your keyboard, and swap days in front of a screen for time with the family, on vacation, and enjoying your life.
That’s hard to think about when you’re just starting your career.
Retirement will still be decades away, and who knows what will happen between then and now? Do you really need lock up your money for 30 or more years? Maybe you won’t need it then. Maybe over the next few years, you’ll launch a successful business or land a high-paying job or win the lottery. If you strike it rich between then and now, you’ll have locked away money you need today to benefit a time when you don’t need it.
We all hope that at some point between our first job and our last day at work we’ll hit the jackpot. Google will buy the company for a truckload of stocks. Royalties will pour in from patent licenses. Salary and bonuses will hit seven figures… and keep going.
But that’s not something that anyone can rely on. And planning your finances in the hope that “something will come up” isn’t just a poor decision. It’s also a very expensive one.
The biggest benefit of a long-term savings goal is the effect of compound interest. The money your money makes makes money too. The longer you leave the money locked up, the more compound interest it earns, and the more work it does for you.
Start saving $500 a month when you’re 25 years old, and by the time you’re ready to retire at 65, you’ll have saved $464,687 at an interest rate of just 3 percent. The $240,000 of income that you’ll have saved will have earned an additional $224,687, an average $5,617 a year.
Start ten years later, though, at 35 instead of 25, and by the time you’re 65, you’ll only have $292,596. Your $180,000 will have earned $112,596, an average of just $3,753 a year.
The earlier you start saving for those long-term goals, the more your money will work for you. Not only will you have bigger nest-egg at the end, you’ll also have needed to save less to get it!
Even if you have a plan to get rich before retire, you should still be putting away money to meet your long-term goals. You should start making those savings as early as possible.
In order to save for any goal—short, medium, or long-term—you’re going to need data. You need to know how much money you have coming in, and how much money you have going out.
You’re also going to need to know where that money’s going.
Tracking Your Income
If you’re salaried, tracking your income should be straightforward. Your payslip will tell you how much you’ve earned gross, and how much you’ve received net of taxes. You’ll also be able to see if you’ve made any automatic contributions towards your retirement pot.
It’s certainly possible that you’re already making some long-term savings, and you don’t even know it!
But not everyone earns the same amount of money each month. Restaurant staff rely on tips. Salespeople earn bonuses. For freelancers, no two months are ever the same. If your income is irregular, look back over the last twelve months and work out your average monthly income.
That’s the money you can expect to earn each month over the next year. It’s the sum from which you’re going to have to pay for your expenses and still put money aside for the short, medium, and long-term.
Identify Your Fixed Expenses
Once you’ve calculated your average monthly income, you can start calculate your outgoings. These will leave you in two ways.
Fixed expenses are the same—or almost the same—every month. They’re your rent, your car payments, your Netflix subscription, and so on.
Make a list of each of those payments.
You might be surprised at how many fixed expenses you have. Some will be necessary. You always need to pay your mortgage or your rent. You’ll need to pay for your car and health insurance. If you’ve got student loans, you’ll have little say in whether you can cut that expense or not.
But other fixed expenses are more flexible. You might even find that you’re still paying for subscriptions for items that you no longer use—or use very rarely. Gyms, for example, rely on the assumption that people sign up at the start of the year, stop attending by about March but continue paying their subscription. According to one statistic, more than two-thirds of gym memberships remain unused. That’s almost $60 wasted every month.
And because the price of your gym membership leaves your bank account automatically, you don’t even notice it.
A subscription can be a very convenient way to pay for things you use all the time. But it can also be a very expensive way to pay multiple times for things you don’t use at all.
When you draw up your list of fixed expenses, divide them into essential expenses and “discretionary” expenses. This second category consist of fixed expenses that you could end without seriously affecting your life.
So your list of fixed expenses might look something like this:
| Essential Fixed Expenses | Discretionary Fixed Expenses |
| Rent | Gym Membership |
| Health Insurance | Netflix Subscription |
| Home Insurance | Audible Subscription |
| Car Insurance | Xbox Game Pass Fee |
| Car Payments | |
| Student Loan Payments |
If you’re looking to reduce your outgoings, you can see that some of these expenses would be easier to change than others. It’s easier to cancel an Audible subscription or downgrade a Netflix subscription, and save ten or fifteen dollars a month, than it is to move to a smaller apartment or give up your car.
But those discretionary fixed expenses are often fairly small. It’s the essential fixed expenses that will often make the biggest difference to your outgoings but will also cause the biggest disruption to your life.
Until you can see where your money is going though, and how it’s leaving, you can’t start planning how you’re going to make your cuts.
Variable Expenses
In addition to your fixed expenses, you’ll also have variable expenses—and these are harder to calculate.
Each month you’ll spend a different amount on food, clothing, and entertainment. Some months are just more fun than others.
Other months, though, are more expensive than others. Vacations, for example, are expensive but they rarely happen more than once or twice a year. Friends’ weddings can mean pricey gifts. Computers grind to a halt every few years, and that winter coat you thought would last a decade might be painfully out of fashion much earlier than you thought.
That’s why to calculate variable expenses you need to look over twelve months and take an average of each type of expense. It’s going to take a while.
Start by listing your biggest kinds of kinds of variable expenses. They’re likely to include:
That won’t cover everything. Inevitably, you’ll have spent money on things you’ll struggle to categorize. You can add another category for miscellaneous items.
Next, pull up your credit card bill and print out each month’s list.
Using a different colored highlighter for each category of variable expenses, mark your outgoings. By the time you’ve finished, you should have marked each line in each of the last twelve credit card bills.
Count the amount you spent over the last twelve months on each category of goods and divide by twelve to produce a list of monthly averages.
Clearly, you could simply add up the total credit card bill at the end of each month, and generate an average of your total expenditures. That’s worth doing too. But you want more detail than an overall picture of your outgoings. You want to see where you’re spending the most money so that you can see where you can make the easiest savings.
If you’re spending a large amount of money on dining out, for example, then count the number of times you eat in a restaurant each month. Take the average cost of each meal, and you’ll see how much you’d save on average each month if you ate at home one extra meal each week.
Or if you see that you’re spending more than $100 a month on clothes each month because you need to dress well for work, you could consider a subscription to a service like Rent the Runway, a kind of Netflix for clothes.
It’s also easy to forget the effect of those rare but big expenses that can take a big chunk out of your bank account, like foreign travel. Those are big treats but because they don’t turn up in your credit card bill each month, they’re easy to forget. You might also dismiss them as too rare to think about. But if you take a foreign trip each year, that’s a regular expense that you need to keep in mind.
You can’t make choices about what to cut until you can see where your money is going.
So now you’ll know your average income. You’ll have a list of your fixed expenses and a list of your variable expenses. If your income is higher than your total outgoings, you’re already saving. You’re living within your means.
But that doesn’t mean that you can’t save more. A few cuts here and there could make a big difference to your savings rate. It could allow you to enjoy better vacations, or an earlier retirement. Dropping a few variable expenses might be just what you need to buy your home sooner than you expected.
And if you’re not earning more than you’re spending then you will have no choice about making those cuts. You can’t save if you spend more than you earn.
Start with your variable expenses—and with the easy options that let you maintain as much of your current lifestyle as possible.
Collect Discount Codes
One simple option is to clip coupons. That used to mean literally cutting coupons out of magazines. These days, it’s much easier. There are plenty of websites that offer easy discounts on a wide range of items. Even Amazon has an entire page offering money off products you can buy on the site.
Before you make a purchase, get in the habit of searching the Web to see if you can find a coupon that will let you save a few bucks.
The search might take a few minutes but it should also be fun. There’s a kick in paying less than other shoppers because you took the initiative to search for a discount.
But be cautious. When you’re looking for coupons, it can also be tempting to load up on items you don’t need because you can see they’re going cheap. Use the discount coupons to lower the cost of products you were going to buy anyway. Don’t use them to increase your spending on items you don’t really need.
Shop with a List—and After You’ve Eaten
One way to ensure that you’re not buying what you don’t need is to make sure that you always shop with a list. Take the time before you go online or head to the store to write down everything you need. There’s no shortage of apps that you can put on your phone and that will keep your list in order. They’ll also ensure that you don’t have to write the same items each week. They can even arrange your goods by category so that you can buy what you need as you’re standing in each department.
Instead of pulling items off the shelf and dropping them into your basket, you’ll only choose the things you know you want. You’ll be less at the mercy of the marketing messages on frozen pizza and chocolate bars, and you’ll find it much easier to keep to your budget.
It’s also a good idea to buy your groceries after you’ve eaten—and not just because you might buy more food. You could end up buying more of everything.
It’s not entirely clear that shopping while hungry does inspire people to load up on more food. One study that found that hungry grocery shoppers buy high-calorie foods has been retracted. But it sounds reasonable. It’s certainly going to feel harder to resist those chocolate impulse buys next to the cash desk if your stomach is rumbling.
But other studies have found that shopping while hungry does make people buy more non-food items. In one study, researchers asked 81 customers leaving a large department store to complete a survey. The survey included a question that asked participants how hungry they were. They also scanned the receipts of their purchases.
The study found that the hungry shoppers spent 64 percent more than the less hungry shoppers. They had also bought more non-food items.
Being hungry while shopping creates a craving for all sorts of things. So before you head to the mall make sure that you know exactly what you want to buy—and that your stomach’s full.
Unsubscribe from Marketing Emails
You can do it without even thinking. You reach a website and a pop-up blocks the page and asks for your email address. It might even offer you something in return: a free e-book, for example, or perhaps a discount on your next purchase.
All you have to do is agree to receive the company’s newsletters occasionally in your inbox.
You like the company and you want to hear from them, so you sign up. If their communications become too annoying, you think, you can always unsubscribe.
The result is that you open yourself up to a steady stream of marketing messages. And those messages work. According to one reported study, email marketing is up to 40 times more effective than social media marketing and works three times as fast. You’re getting targeted ads delivered right to your inbox.
Smart email marketers also track how you react to those emails. If you read the email or click a link, even if you don’t buy, they’ll send you more messages that you do like. There’s a good chance that eventually, you’ll buy something you really don’t need.
The more email subscriptions you collect, the greater the likelihood that you’ll spend outside your budget.
Take the time to look through all of your email newsletter subscriptions. Recognize that those emails aren’t just there to inform you. They’re there to sell to you. They’re advertising tools targeted at your preferences designed to persuade you to buy. Unsubscribe from all the lists you aren’t genuinely interested in reading.
Know Exactly How Much You’re Paying
Retailers have a host of different tricks to make it easier for people to buy. Many of those tricks involve hiding the price of their goods.
That doesn’t mean that they don’t put a price on them. They just make the price look deceptively low and easy to pay. An Apple iPhone 12 Pro, for example, costs from $999 in an Apple Store. That’s a lot of money for a phone. It’s the kind of payment that leaves a big hole in your savings and hurts to hand over.
Buy the same phone from AT&T, however, and you can pay just $30.56 a month. That’s much more affordable. It’s less than you’d spend on a night out with friends for the latest top-end smartphone. It feels like an affordable way to use something you otherwise wouldn’t be able to afford. Over 36 months, though, you’ll have paid $1,100—a hundred bucks more than if you had shelled out a single payment. And you’ll have to add tax to those payments too.
Sometimes, pricing can be lower than it appears. The sticker price of a 2021 Ford Explorer, for example, starts at $32,925. That’s an eye-watering amount of money that few people can afford to pay out of pocket. But auto dealers recognize that they won’t sell many cars if they expect buyers to write a check for the full amount before they hand over the key. They offer a host of different financing options.
The sticker price allows buyers to compare the final price of different makes and models. But it says nothing about the actual cost of owning—or using—the car.
To calculate that cost, you’ll need to know the size of the down payment you have to make, the amount you have to pay each month (including interest payments), and the duration of the loan.
So imagine you’re buying a new car with a sticker price of $35,000. You have to make a down payment of $5,000 and monthly payments of $350 for 36 months.
A deal like that feels as though you’re only paying $350 a month to drive the car. But that excludes the down payment. In fact, at the end of the three years, you’ll have paid $12,600 plus the initial $5,000. That makes a total of $17,600. The monthly payment, including the down payment, will have been $489.
But as you come to decide whether you want to buy the rest of the car or trade it in, remember that you’ve actually paid less than $489 a month. You’ll have paid about half the price of the car but the car is likely to have retained about 80 percent of its value. Sell the car and you’ll receive 80 percent of $35,000—or $28,000. You’ll need to pay the seller the remaining half of the car’s initial price, or $17,400. That gives you another $10,600.
In addition to paying for the use of the car you’ll also have put money into it that you can later take out. Using that car for three years will actually have cost you $7,600—or just $211 a month.
The aim of leasing is to ensure that buyers pay little more than the depreciation cost of the vehicle.
Whenever you’re buying something with a long-term loan or on a lease basis, it’s worth calculating exactly how much you’re paying each month to use the item. You might find that you’re paying much more than you think, and that there are cheaper ways to get the same service.
And sometimes, you can find that the service is more affordable than you thought.
Counting Your Costs
Most of the money you spend each month will be clear and easy to calculate. Your gym membership and cable fees rarely change. Rent should be the same from month to month.
Other expenditures change more often. Energy expenses rise and fall with the seasons: you might ramp up the air conditioning in summer, drop it in fall, then turn on the heating in winter.
And some costs change from week to week. Some periods are just more entertaining—and more expensive—than others.
What you cut will depend on you, and on your priorities. You’ll have to choose whether you should cut back on eating out or cancel your gym membership. Or even move to a small apartment to save on rental costs.
But as we’ve seen, until you know what you’re spending, you can’t decide what you’re cutting.
As you count your costs, you might find that you’re surprised by how much you’re spending. Small expenses made often quickly build up.
But there’s one expense that’s hard to see and is likely to be your biggest financial drag: credit card debt.
Credit cards are invaluable. They’re vital ways to pay for almost anything you want to buy online. They ensure that you don’t have to carry around cash everywhere. They can give you points that you can trade for discounts and even flights and hotel stays. And they give you credit. They let you buy now and pay when you can.
That credit, though, is expensive. Interest rates typically start at around 15 percent each year. Run up $1,000 on your credit card, and roll over that debt for a year, and you’ll have added at least $150 to your debt.
That $150 then runs up its own debt so that the amount you owe can very quickly run out of control. The average American family owes $6,270 in credit card debt. That means that the average American family is liable for at least $940 in annual expenses to credit card companies.
The first thing you should do when you’re looking to save money is to pay off your credit debt. Remove those large interest liabilities. Stop paying credit card companies their giant sums for the privilege of using their money.
Once you’ve paid off that debt, you should get into the habit of paying the balance off entirely every month. Borrowing from credit card companies is one of the most expensive ways to obtain credit.
That doesn’t mean you should never borrow money. Businesses borrow to invest; they use money from the bank to make more money in the future that covers both the debt and its interest. Store credit can help you to enjoy a purchase now instead of when you can afford it in the future.
But always check the annual premium rates, or APR, so that you know exactly how much you’re paying. Check to make sure that you can’t borrow the same amount more cheaply elsewhere.
And be certain that you can’t wait to buy the product now, instead of waiting until you’ve saved enough to pay in cash.
So you’ve paid off your credit card debt. You’ve cancelled subscriptions to services you don’t use. You’ve found others way to reduce your spending, and you now have more coming in than going out each month.
You’re saving money.
What are you going to do with all that money?
While the simplest option might be to simply to leave it in your checking account, inflation will eat away at its value. If you have $5,000 in your checking account and the inflation rate is 2 percent, you’ll pay $100 to keep the money in your account.
A much better idea is to move the money to somewhere it can work for you.
You can, through the bank, lend it to other people. Or you can buy an asset, such as a share of a company, that you expect to rise in value. When you’re ready, you can sell that asset for a profit. Both will give you a hedge against inflation, and should also enable your money to attract more money.
The Savings Principle
However you choose to invest your savings, a basic principle will apply:
Higher returns require higher risks and/or longer commitments.
To bring money into a high risk investment, the borrower will need to offer investors an incentive. That incentive comes in the form of a promise of greater rewards in the future. Venture capitalists expect a chunk of the company in return for their investment. They assume that most of those investments will fail but the one or two in ten that come good will more than make up for the losses.
If you want a borrower to give you back your money after a short period of time, you’ll have to give up on higher interest rates. In return for your agreement to commit your money for a longer period, a borrower will pay you more money.
That means that as you’re exploring different ways to save money, you’ll need to keep risk and commitment in mind.
You should also assume that any investment offer that promises you high returns with little or no risk is likely to be too good to be true!
To obtain high returns, you need to accept a high risk of losing your money and lock up your funds for a long time.
The simplest way to invest your savings is to move them out of the checking account and into your bank’s savings account. (These might also be called “money market” accounts, although money market accounts typically also allow check writing services.)
The savings in a savings account will be safe. The Federal Deposit Insurance Corporation (FDIC), a government body, insures your bank account holdings. As long as you have no more than a total of $250,000 in your deposit and savings accounts, you will always have that money. If the bank becomes bankrupt, the FDIC covers the balance.
You can also access your savings at any time. You don’t need to make a commitment. The bank might choose to levy a monthly fee if your balance falls below a certain level, but you can always spend your funds.
The cost of that no-risk, no-commitment option is a low interest rate. A typical savings account at the Bank of America now pays no more than 0.01 percent. Anything above half a percent—rates available from some “high yield savings accounts”—can look generous. Those interests rates will rise when the Fed increases its interest rate. But for now, putting your money in a savings account will deliver very little. You’ll be lucky to earn more than the rate of inflation.
Think of a traditional bank savings account as a no-risk, no-commitment option that gives you very low returns.
The reason that banks pay interest on your savings is that they take that money, and they lend it out. They lend it to businesses, fund mortgages, and cover overdrafts. They charge interest on those loans and they share a little—today, a very little—with savers.
But banks aren’t the only way to lend money and generate interest.
The government needs to borrow money too. And because the government can always pay back borrowers—by squeezing taxpayers—their risk level depends on the stability of the political infrastructure. An IOU from a government with a history of insolvency, such as Venezuela, would be worth much less than an IOU from the US government.
Those IOUs take two forms.
A treasury bill or T-Bill, has a face value and a specific maturity date. It might agree to pay the holder of the bill $20,000 on August 1, 2025, for example. The treasure will sell that bill for less than its face value. You might pay $19,000 now to receive $20,000 in a few years.
The profit is called the discount rate, and takes the form of a percentage, such as 5 percent.
You don’t have to wait for the bill to mature before selling it, though. If you’ve bought a bill with a five-year maturity, for example, you could sell between before the maturity date for a portion of the profit.
A treasury note works in a similar way but instead of paying a fixed sum on maturity, it pays a fixed rate of interest every six months. Maturities can be as short as two years.
You can buy both treasury bills and notes from the Treasury website or through your bank. But again, the rates will be very low. Bill rates are currently as low as 0.09 percent for a year. If you’re willing to lock your funds up for 30 years, you’ll get 2.16 percent.
Both treasury bills and treasury notes are ways for the government to borrow money. But both governments and companies can issue bonds. Again, these are IOUs. You lend money to the borrower—whether it’s a company or a government—and receive in return a chit promising to return a set amount at the end of the loan period.
Like any other IOU, you can sell that chit for less than its face-value. That lets you receive some of your funds early. So if you bought a bond for $1,000 that pays $1,100 in three years’ time, you might be able to sell it after eighteen months for $1,050.
Bonds come in various degrees of risks. Government bonds are usually low-risk and therefore pay the lowest dividend. Companies can more easily fall into bankruptcy so their bonds are higher risk and pay higher dividends.
In practice, though, retail investors often buy a basket of bonds—a bond fund or an exchange-traded fund (ETF). Instead of putting all of their funds into a single loan, they purchase a collection of bonds from multiple companies. If one of those companies fails, they won’t lose all of the loan. The dividend will be an average of the basket’s returns.
The advantage of bonds is that they’re relatively reliable. Purchase bonds in strong companies with a good track record and you can expect to see that investment pay off. The disadvantage is that bonds often have low yields, especially when interest rates in general are low.
In general, the reliability of bonds usually makes them one essential element in an investment portfolio. They ensure that whatever happens in the rest of the financial market, some of your savings will be safe and will come back to you with interest.
Bonds are the relatively safe part of an investment strategy for your savings. Choose reliable companies or ETFs and you should be able to rest easy. Those companies and governments will pay you your money back with interest.
Stocks and shares are higher risk. (The two terms are largely interchangeable. “Stocks” refers generally to parts of multiple companies, while “shares” usually refers to parts of a single company.) When you own a share, you own part of the company. Buy a share in Amazon, for example, and it will cost you more than $3,400. That price will give you one share out of the more than 504 million that the company has released. But you’ll be one of the owners of Amazon.
Ownership of that share can give you three benefits.
It might give you voting rights. In general, shares divide between those that provide voting rights, allowing owners to take part in company decisions, and those that don’t. The rights are important for large commercial investors who want to retain some control over the companies they’re buying on behalf of their clients. But they’re less relevant for retail investors who own too few shares for their votes to have much influence.
More importantly, a share can deliver a dividend. Not all shares pay dividends but those that do pay the owner a portion of the company’s profits. Each quarter you’ll receive a notification informing you that you’ve received a payment.
If you own enough dividend-paying shares—and if the companies you own continue to make profits—you could find that you’re be able to live on the income generated by those companies. You’ll have to invest a lot. If the dividend yield is 3 percent, a million dollar investment would still only give you $30,000 a year. But at the very least, those dividends can be useful bursts of extra income that your savings generate.
The easiest way to use share ownership to grow your savings though, is by buying shares of companies that continue to grow. As the companies grow, the value of the shares will rise. The value of the profits that you receive when you sell those shares will grow too.
Share Ownership Strategy
While there’s no shortage of investment strategies that use shares, savers generally have two strategies. They can invest for the short term; and they can invest for the long-term.
Short-term investors have to watch the markets. They buy low, sell high, and try to profit from small movements in share prices. It’s risky and requires expertise. Most day traders lose money. Short term stock investments aren’t a savings plan.
A savings plan requires a long-term strategy. That means balancing your investments across companies and across industrial sectors. You won’t get all of the benefits that come with a sudden leap in one industry but you will limit your losses if the sector falls. The daily, weekly, and monthly ups and downs in the market don’t bother you. You don’t sweat when you see some of your portfolio fall into the red because you know that over years, the value of the market usually grows. You might lose in the short-term but by the time you come to crack open your savings, you should be back in profit.
Saving with Mutual Funds
One way to make that investment balance easier to build is by buying mutual funds. Gathering a collection of different shares and bonds from different companies and lenders would require some research. You’d need to be able to assess risk and do it constantly. If one company starts to look riskier, you’d want to swap it out for a safer one in order to maintain the same level of risk.
Mutual funds do the work for you.
These are pools of securities that can include stocks, bonds, and other assets. Professional money managers choose them and maintain them according to set criteria. You can choose a fund based on its risk level or specialization. Some funds, for example, might include a basket of tech stocks. Index funds are a kind of mutual fund that tries to replicate the movement of an index such as the Dow Jones.
As an investor, you’ll always be able to see what’s in the fund and check its performance. Mutual funds give individual investors easy access to professionally managed investment portfolios.
But they come with a price. There’s an annual fee and there may be a commission as well. When you check the performance of a mutual fund, be sure to check how much it charges too. You might be able to get the same basket of shares and the same results for a lower fee from a different mutual fund.
Shares carry a higher risk than bonds. With that higher risk, of course, comes higher returns but using your savings to buy parts of a company can be confusing. You can look at the previous performance of a company or fund. But previous performance is a limited guide to future performance. With so many companies and funds to choose from, how do you pick the safest ones—and the ones with the highest returns?
And having poured your savings into bonds and shares, it’s hard to see where your money has gone. You can look at your money account and see columns of figures and initials, but you can’t see what you own. Nor is it always easy to understand what’s causing the prices of the assets to rise and fall.
Investing in real estate can feel more straightforward. Instead of buying names on a page, you’re buying bricks and mortar. You can travel to a building, and say: “I own that.” You know what your savings have bought you. You can touch it and feel it.
There are multiple ways to put your savings into real estate but none of them are as easy or straightforward as they sound.
One option is buying a property to rent it out. Instead of putting your savings into a bank account or in stocks and shares, you put them into bricks and mortar. When you find people who want to live in those bricks and mortar, they pay you rent. So your savings generate an income stream. Better yet, they also cover the mortgage so you don’t need to save all of the price of the property in order to invest. You just need to save enough to make the down payment.
The result should be that tenants pay the mortgage on your property and give you a little extra income. Once the mortgage is paid, you’ll be able to take all of the rental income. And because real estate tends to rise in value, you’ll win a third income too.
In practice, it’s not that easy. Finding and maintaining a property is a job, as is checking and servicing tenants. The rate of return on your investment will depend on your location, the nature of the property, and so on. There are maintenance costs and taxes. There may be periods in which the property is empty. You’ll still need to pay local taxes and the mortgage. Your rate of return might be no better than you could have found in the financial markets with none of the maintenance and servicing work.
Buying properties in order to rent them out is a long-term investment. The aim is often to hold on to the property until the rent has paid off the mortgage. The income then jumps and the property will have increased in value.
But you have regular building maintenance. You need to find tenants and cope with their complaints. It’s work, which is why many property owners outsource the property management to service companies. But that eats into income, lowering returns.
One alternative is to flip properties.
The goal is to buy a property for a low price, add value, then sell it for a profit. That usually means buying a run-down property in need of renovation or buying a property in good condition then renovating it.
Either approach requires using just enough savings to obtain a mortgage and take possession of the property.
The advantage is that your savings aren’t tied up for a long time. You only need to put them in the property for as long as it takes to sell it. Once you’ve found a buyer, you get your savings back—with a profit.
You also don’t have to deal with tenants or property management.
But you will have to invest work and more finances in renovating the property. If you can’t sell it quickly, you can quickly run into trouble. You’ll still need to make the mortgage payments so you could find yourself with an extra property to pay for.
And you’ll need a good understanding of your local property market. You can’t tell whether a property has a good price if you don’t know how much a local property should sell for.
Both buying to rent and house flipping involve buying properties. You’ll need to view the properties, assess them and put in the work needed to generate a profit from them. There is an easier way to make money from real estate.
Real estate investment trusts, or REITs, work like mutual funds. You lend money to a corporation or trust that collects money from multiple investors. The corporation or trust then uses that money to build a real estate portfolio. Investors receive a return on their investment in that portfolio.
Unlike mutual funds, REITs have to pay 90 percent of their taxable profits as dividends. So you can expect a good income stream. They’re easier to buy than a home, and they can include commercial property that retail investors tend to avoid.
You can also cash out easily. Because REITs are exchange-traded, you should always be able to find a buyer for your investment. So your savings aren’t locked up in the way they would be if you buy to rent.
You can think of REITs as a kind of stock. It pays dividends by holding for the long term real estate assets that generate revenue.
The downside is that you can expect to pay a fee to the manager of the REIT. You also can’t borrow against your REIT holdings in the way that you can borrow against your property. And you don’t get the thrill that comes from driving to your property, and saying: “I own that.” You’ll still feel that you’re investing in paper rather than in something solid and real.
There are plenty of other, more complex ways of investing in real estate. You can join real estate investment groups, invest in wholesaling, NNN leasing, tax liens, and more. But while real estate can be a good place to put your savings, like any other form of investment it also comes with risk. Real estate can drop in value, as well as rise. Tenants don’t always pay. Property can suffer damage. Mortgage rates can change. Make sure that you’re prepared for both the risk and the work involved in putting your savings into real estate.
Savings accounts, bonds, stocks, and real estate are all places in which you can put your savings so that they’ll be safe for the future. Any investment can go down as well as up but if you balance your savings portfolio carefully, you should find that its value grows over the years.
Those savings, though, will come from post-tax dollars. First, you pay your taxes and cover your expenses. Then you get to save whatever is left over.
But the government wants to encourage people to save for their future. It wants everyone to put aside some money each month so that they’ll have something to live on when they reach retirement. So it makes some savings plans tax-preferred. First you save then you pay tax on whatever is left. The result should be both a higher rate of savings and a lower tax liability.
All of these plans, though, aim to save for retirement. The tax authority isn’t interested in helping you to save for a bigger home or a newer car. It wants to prepare you for the day you retire. So when you put your savings into a retirement fund, you’ll be locking them up for a long time. But in general, you’ll also be taking little risk. You won’t be able to enjoy huge rates of return. Nor will you be able to pull your money out if you need it. But you should find that it accumulates over the years until you do need it.
Pensions, or defined benefit plans, are rare these days. Companies make contributions to a pension fund on behalf of their employees. They then promise a return regardless of the performance of that fund. If the pension payments haven’t performed well enough to meet the obligation, the company makes up the difference.
That means taking on a lot of risk. Companies that had offered pensions to their employees, particularly in the automotive industry, soon found themselves with large obligations. At the start of 2020, GM agreed to move $570 million into its pension funds to ensure that it could pay retirees the pensions it had promised.
Defined benefit plans promise greater security and more predictability but only by moving the risk to the employer. Most employers now are giving that risk back to their employees. Private companies more usually offer defined contribution plans.
In defined contribution plans, employees put a set amount into their pension funds each month. Fund managers choose where to put those savings, and the money remains locked up until retirement. Savers won’t know how much they’ll receive when they retire until they grow close to their retirement age. They’ll have more to live on if the market performs well and less if the market performs poorly.
A defined contribution plan won’t tell you how much you’ll receive when you retire. But it will tell you how much you’ll be saving each month—and that saving will be relatively painless. If your employer offers a 401(k) plan, it will take your retirement savings directly out of your pay. You won’t receive that money in your bank account. So you won’t feel as though you’re giving up spending power now for spending power in the future.
A 401(k) plan will give you a couple more benefits though, and they’re very valuable.
The first is that the savings you put in a 401(k) plan come out of pre-tax money. Instead of being taxed on your full income, then saving from what’s left, you’ll first save then pay tax on what remains.
Not only will you save but you’ll also lower your tax bill. In effect, the government will pay you to save for the future.
Your employer might also pay you to save for the future. Some employers offer matching contributions. For every dollar you agree to put in your 401(k), they’ll add money of their own.
The match is rarely 1:1. Companies will usually cap the amount they’re willing to add and they might have vesting rules. Leave the company before the end of the vesting period and the company will be able to claw back some of the matching contributions.
The payments provide a way for employers to increase salaries. But they also provide a way for companies to hold onto their staff. If they’re investing in a team member’s professional growth, they want to make sure that those team members stay with the company.
There are limits to the amount that you can save in a 401(k) plan, though. The limits tend to rise each year. In 2021, total contributions from employees is $19,500 for the year. You can add another $6,500 in catch-up contributions if you’re aged 50 or older. Matching contributions can bring that amount up to $58,000 or $63,500 (and no more than 100 percent of income) for people aged 50+.
If you withdraw your savings before the age of 59.5, however, you will face penalties. In addition to the income tax on the funds, you will have to pay an extra 10 percent penalty tax. The government wants you to save your money for your retirement, and keep that money saved until retirement.
Despite that commitment, in general, experts recommend that you put as much into your 401(k) as you can. Max out the matching benefits so that you don’t leave money with your employer that it’s willing to give to you. And take as much of the tax benefits as you can.
Being able to save from pre-tax dollars can help to reduce your tax bill. But you will still have to pay tax on that money. You’ll pay it after you retire, when your income is smaller and your tax rate lower. But if you expect to earn more after you retire, and to be in a higher tax bracket, it would pay to save from post-tax dollars.
First, you pay the tax on your income then you put some of what’s left in your retirement pot. When you take the money after you retire, you’ll receive those funds tax-free.
That’s what a Roth retirement plan allows you to do.
You’ll face the same limits on a Roth 401(k) as you would on a traditional 401(k) but the penalties for early withdrawal are different. Because you save money with post-tax dollars, you won’t have to pay income tax on the amount you withdraw. But you will still get a 10 percent penalty and you’ll have to pay tax on your earnings.
Both 401(k) plan and Roth 401(k) plans do allow you to borrow against the savings in your retirement pot. Those loans do not carry a penalty, unless you fail to pay them back in time. The IRS will regard a default as an early withdrawal and start demanding taxes and penalties.
Whether you’re saving with a traditional 401(k) or a Roth 401(k), you should plan to leave your savings to build until you’re ready to retire.
401(k) plans are usually available to employees. The self-employed can use a “solo 401(k)” or a “self-employed 401(k).” It works like any other 401(k) except that the matching payments come from the same source: when you’re self-employed, you’re both the employer and the employee.
But a 401(k) isn’t the only way to save for your retirement. An Individual Retirement Account, or IRA, allows savers to put money away for the future on their own terms. They don’t need to rely on their employer’s 401(k), and they’re free to choose their own fund.
Like 401(k) plans, IRAs can come in traditional and Roth forms but they have much lower limits. Total annual contributions to your IRAs cannot be more than $6,000, or $7,000 if you’re aged 50 or more. They also carry the same early withdrawal penalties.
Think of IRA plans not as replacements for your 401(k) but as a way to increase your savings rate on a tax-preferred basis.
401(k) plans and IRAs give you ways to save as you go. That’s exactly what you should be doing, and those retirement plans are intended to encourage you to do just that. By allowing you to put off your taxes and take matching funds, the IRS gives people incentives to put money aside for the future.
But what do you do once you’ve saved that money? How do you spend it when the time comes and you’re ready to retire?
If you have a pension or some other retirement fund, the fund itself will start to make disbursements. Each month, you’ll receive some of the money you’ve saved. You might also prefer to take a lump sum if you prefer.
But if you haven’t put your savings in retirement fund, it’s not too late. You can also buy an annuity. You can withdraw your savings—or a part of them—give them to a financial firm, and receive in return a monthly income.
It’s also possible to buy an annuity with a lump sum or, like a retirement fund, pay in installments over years. Again, you won’t pay the taxes on the dividends, interest or capital gains until you start to receive the disbursements.
Annuities can be complex. You’ll need to consider what sort of conditions—or riders—you want to attach your annuity. You’ll also need to decide whether it’s worthwhile or whether you wouldn’t be better off turning your savings into income yourself. But they’re another way to save for the future.
Saving is vital. You need to save for the future, for a rainy day, and for the emergencies that everyone encounters sometime. You should be spending less than you earn and putting money away for tomorrow.
If you’re not already saving, start by counting your income and your outgoing. Look for expenses that you can cut. Pay off your credit card bills—it’s the most expensive way to borrow money short of loan sharks.
Finally, choose a savings plan and get in the habit of filling it every month.
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