08.05.2011 / Saving Made Simple. Pay Yourself First.
Savings. It sounds like such a simple commitment. You tell yourself that every time you get paid, you will take a chunk of money and put it into your savings account. But then your paycheck comes and so do the bills and other unexpected financial commitments. Before you know it, your paycheck is gone, and your savings account is no bigger.
What is the solution? Pay yourself first. Or, more specifically, pay your savings first. Here’s a look at why it’s one of the savviest saving steps you can take – and how you can make it one of the easiest too.
Automatic Is Easy.
What’s the easiest way to NOT spend your paycheck before you save some of it? Stash the cash before it reaches you. Many employers allow you to take advantage of automatic deposits: You pick the sum of money or a percent of your paycheck to be taken out and placed into your savings account before you get paid. The beauty of this technique is that you can “set it and forget it.”
Time Really Is Money.
Is $100 in your hand today worth the same as $100 given to you next year? Not necessarily. According to a concept called the “time value of money,” a dollar today is worth more than a dollar that you won’t get until sometime in the future. If you have the money now, you can invest it, earning interest over time. The worth grows if you have an account with compounding interest, where you accrue interest not only on your initial balance, but also on the interest earned.
Curious as to how much your money could be worth? Take a look at these financial calculators at http://firstnational.com/001/html/en/personal/resource_center/calculators.html (click on savings).
Do you have any savings tips that you’ve found are effective? We’d love to have you share them. Post a comment now below.
