1. Set a goal to save money in an account every month. Make it a manageable amount. Parse it down so that you do it every week, or twice a month when you get paid. This way it’s not such an overwhelming task.
2. Direct deposit. Have the money taken from your paycheck and put into the bank. Or set up a recurring transfer from your checking account into your savings account. This will make it much easier to stick to your goal.
3. Re-prioritize. Set your personal finance priorities, and include savings higher on your list.
4. Re-do your budget. Create a new budget for the new year. Include the money you set aside as a “necessary” expense.

You will also want to maximize your savings. You can do this by opening an online savings account, or by investing part of the money you set aside in an account, taking advantage of dollar cost averaging.

Post from: EveryJoe

Resolving to Save More in the Coming Year

Today I’ll start with a great question from an associate of mine in the blogging world:

“I have a couple of thousand dollars that I would like to put away.
Currently, I’ve been using CDs, but are there any other good, low-risk
areas I can put the money? I don’t need it for at least a year or so.

Oooh. Good question. Especially in the current investing climate of fear. The CDs aren’t a bad idea, as the returns aren’t too bad (in the 4.55 area). And if you put in more than $2,000, you could get quite good returns, on the order of 6.5 for one year for $5,000. If you put in more, for longer, you can get even higher yields. But there are other options.

Online savings account

This is my absolute favorite. We so often forget that a savings account is an investment. You can get a high yield online savings account (mine has a 5.05 APY — not too bad for a cash investment) that you can access anytime. If you are looking for safe, it doesn’t get much safer than an online savings account with an FDIC-insured bank or credit union. Watch out, though. Some have a required minimum.

Government bonds

Long-term U.S. Treasuries are getting popular right now, since economic fears are looming, but if you want your money in a year, it may not be the best bet (although you can cash it in early, after a year, penalties and what-not destroy some of the value).

However, government bonds in general, including short term Treasuries and local municipal bonds, are usually fairly safe. The yield is the 4.28 to 4.41 range. Stay away from corporate bonds for now, as well as bond funds. They may be good buys, and if you choose carefully you could make a real killing, but if you want your money in a year, it might not be the best, since who knows when these companies will be recovering. And such investments aren’t exactly safe, either right now.

Money market

I like money market accounts because you have more access to your money. However, the money market rate is lowish right now, so you’d actually get a better return with your CDs or government Treasury notes. But the money market mutual fund is an interesting choice for a long-term “safe” investment for your portfolio. Just don’t expect it to wow you on yields.

Just remember: if you are looking for “safe” (and all investment has some chance of loss — even in cash assets), you are not going to get fabulous yields. The best you can hope for is something in the 4.3 to 5.5 range with “safe” investments of $2,000.

Post from: EveryJoe

Ask the Piggy Bank: Low Risk Investments

“Pay yourself first”

This is a concept that few people really grasp. But it is still true nevertheless. It is very important that you pay yourself first. Before you spend your money on other things, you need to set it aside for later. Try and arrange your budget so that you are living only on 70% to 80% of your income. If your company offers the option, have part of your money put into a retirement account. Then take some of what’s left and put into some form of savings account. I prefer a high-yield online savings account.

When you pay yourself first, it doesn’t mean you have to put your money into something resembling a traditional savings account. I like to put money regularly into stock investing every month. Dollar cost averaging (this is how your retirement account works, BTW) allows you to put in a little bit each month, buying partial shares, and maximize the return on your dollar over the long haul.

And ultimately, that’s what saving money is all about. The long haul. Pay yourself first, and you will find that down the road, you will have much more.

Post from: EveryJoe

You’ve Heard it Before: Pay Yourself First

Keys to defining your financial goals

When defining your financial goals, it is important to keep a few things in mind:

• Be specific. You have to be specific. If you want money for a vacation, set this financial goal: “I want to save up $6,500 for a trip to the Caribbean.” This also works in “I want $1 million by the time I retire.” Do some research and find out what, exactly, it is that you will need. Then make your goal specific.
• Be realistic. This is another key. You need to honestly evaluate your financial situation and then determine what you can do REALISTICALLY in terms of meeting your financial goals. If you haven’t started saving for retirement, and that milestone is only 8 years away, $1 million isn’t very realistic in most cases. Setting financial goals that are attainable means that you have to take a brutally honest look at your financial situation.
• Make a plan. When setting financial goals, it is vital to make a plan. If you want to save up that $6,500 for a vacation, you need to figure out what you should do. If you want to make the trip in a year and a half, you need to plan to set aside $361 per month. Put it in a high yield online savings account each month, and you’ll be pleased when you get a little more out of what you put in. If you can’t put in $361 a month for the next 18 months, revise your plan. Look at things realistically and say that you’ll go in two years ($270 a month).

It doesn’t matter how big or small your financial goals are. If you carefully consider what you want, and what you can do, make a plan to get there, and then STICK WITH IT, you should be able to attain your financial goals.

Post from: EveryJoe

Defining Your Financial Goals

Online savings account

When you go to a traditional brick and mortar bank and open a savinga account, the pitiful return seems hardly worth it. Less than 1%. But if you go online, sometimes even to the Web site of that same bank, you will find that you can open a savings account with a 5% annual yield. That’s much better.

However, you should be careful when opening such accounts. You want to make sure you are dealing with a reputable institution, and you should realize that the bank will probably mail you documents that need to be signed and returned before the online savings account can be opened. And read the small print. The Citi online savings account (which I have) requires that you have a free checking account linked to it (it actually turned out to be quite convenient). I have to maintain a minimum of $500 between the two in order to avoid a fee. There are online savings accounts that do not have these restrictions (I think ING is one of them).

While the online savings account is going to replace your retirement account, it does make a rather handy way to build up an emergency fund that is readily accessibile while getting a larger yield.

Post from: EveryJoe

Boost Your Savings Account