When you save money, you are paying yourself. You are putting your money away until you use it sometime in the future. Here's the catch: the longer you wait to use your savings, the more you have! In the midst of the most recent and vicious recession that any American has experienced, saving is like the new black, or the new 20, so to speak. It's en vogue. So for those of you who are new to this or are simply out of practice, here's The Delasol Group's Online Guide to Saving.
Choose Wisely. It's important that you know now that small decisions can have a big impact. ECONtrepreneurs have an uncanny ability to quickly surmise smart economic decisions from not-so-smart ones. Should you save $100, charge $100 a month, or do both (Your answer depends on your cash flow)?The regular savings you start now will accumulate quickly over time. The regular debt you incur now will do the same. Choose wisely.
Interest is interesting! If you don't understand interest rates and how they can work for and against you, you should not apply for any type of credit. Excessive interest charges are what keep most people in debt long after they paid off the original amount they borrowed! Why does this happen? For most, the answer is simple: read the small print. But, in the likely event that you won't, here's The Delasol Group's quick and dirty Primer on Interest Rates, at no additional cost!
Interest rates as they relate to saving money are good: the more you save, the more interest gets paid to you. But why do banks pay us interest? The answer is because people are essentially loaning their money to the bank when they open accounts. Your savings don't sit untouched until you make a withdrawal. Your bank uses your money to lend to other people, and when you need a loan, the bank uses someone else's money to lend to you. Confidence (there's that word again) is what allows people to trust that their bank will have their money when they need it. Paying interest is how your bank rewards your trust. If you are looking for somewhere to save money, you should always compare the interest rates on different accounts and consider the bank that has the highest rate of return.
Interest rates as they relate to credit hurt, rather than help you. You are charged interest for taking out a loan or mortgage or opening a line of credit (like a credit card or a charge/store card). It's required that a lender tell you how much interest you are responsible for. Often, you will see your interest obligation rise if you are late on or miss a payment. And, lenders determine the interest you pay based on your credit history. If you have struggled with making debt payments in the past, you will likely receive a higher interest rate. Think of it like this: your interest payments are how you reward the lender for giving you money to buy things you don't have the cash for, such as a home, an education or a spending spree (not advised until your cash flows are well -insulated from random economic shocks) Interest payments in this sense are the cost of borrowing money.
Prioritize Wants versus Needs. This one is simple in theory and difficult in practice. Hold on to your receipts for a week or two and then go back and see what you spend your money on and where you can cut back. Small purchases can be subsidized by ECONtrepreneurship in Action. Eating out too much? Make a better grocery list! Ballin' at Starbucks? Brew your own blend at home! Shop-a-holic? Mix, match and re-accessorize existing clothing to create new ensembles and buy clothing out of season! Take control of your lifestyle instead of allowing your lifestyle to control you.
What ways have you started saving in 2009? Tell us!
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