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Put money away, even when you feel like there's nothing left to save.
You've heard it before… Put money away. Save 10% of your income. Fund your 401k plan. Pay yourself first. Establish a nest-egg. Spend less than you earn. But what if you can't? How are you supposed to 'save' when there isn't enough money to pay the bills in the first place?
There's no easy answer to this question, but here are several solutions, depending upon what's holding you back. In an honest moment, ask yourself which of the solutions apply to your situation. Once you've figured that out, it's a matter of taking the steps to resolve whatever it is that's making it impossible to save. In every case, you CAN pay yourself first. As it is with many of life's solutions, the answer may be simple, but it's never easy.
1. Too much spent on little things. That overpriced coffee in the morning or lunch at Starbucks three times a week really CAN make a difference. A small hole can sink a big ship. If pocket-change spending is robbing you of long-term security, keep track of all of your spending for seven consecutive days. If you don't like what you see, take 10% (or whatever you can save) off the top before anything else, pay all your bills, and give yourself some pocket money from whatever is left over.
2. Too much spent on big things. Perhaps you're careful with the day-to-day expenses, but are carrying a huge mortgage on your house. Maybe your insurance or long distance phone bills could be much cheaper, but you haven't reevaluated the options in years. Take a look at the big expenses and see if you can find unnecessary (but maybe very much desired) holes in the ship.
3. Lack of organization. Has it been so long since you last balanced the checkbook that you're not sure what percentage of your income is going towards groceries, and what percentage towards fun? It's time to get organized. Find a system that works for you and get it together. You may find that once you're organized, your problem is in a different category. But you won't know that until you get your ducks in a row.
4. Too much debt. You may feel that the best use of your money right now is getting out of debt. And you're probably right. However, if your only focus is paying off the high-interest credit cards, what happens if you hit a bump in the road and need cash? You borrow again. That puts you right back where you started. So instead of putting as much as you can spare towards paying down debt, set aside at least a small percentage of your income, perhaps 3%, towards savings and put as much as you can after that towards debt. It's a good habit that will ensure you won't have to borrow in case of an emergency, and it will get you ready for the debt-free days ahead when you'll be able to save a full ten percent.
5. Waiting to see what's left after paying everyone else. If you do this, there will NEVER be anything left to put away. Its human nature to spend everything you have and then some. Pay yourself before you pay anyone else or you won't pay yourself at all.
Payroll Deduction – depositing a set amount automatically each month from your paycheck - is an easy way to save. You choose how much you want deducted each pay period. At Dominion Energy Credit Union, you can change or cancel your payroll deduction at any time.
6. You're not earning enough. Most people will quickly decide this is the category they fit into, but take a minute to evaluate this: do you have a job? Are you paying your rent or mortgage? Utility bills? Are there any luxuries, big or small, that you're paying for? This is really a temporary category for those newly unemployed or those who have had a recent change in circumstances, such as a new baby or other additional household responsibilities. In this case, your only answer is more income. However, if your ship is sinking due to any of the reasons above or those which are not stated here, increased income will not resolve the issue.
Bottom line? Take something off the top. Even if you have to start with as little as 3%, you'll naturally cut back on unnecessary expenses and have financial security to show for it.