New Year's resolutions for your wallet: Learning how to save money to cash in on future benefits

2014-01-12T07:00:00Z 2014-01-15T18:18:07Z New Year's resolutions for your wallet: Learning how to save money to cash in on future benefitsChristine Bryant Times Correspondent nwitimes.com
January 12, 2014 7:00 am  • 

A clean slate.

That’s what the New Year is to many, including financial experts who say now is the perfect time to start saving if you haven’t been.

Though times are still tough for many residents in this region, there are simple steps you can take to put away a few bucks here and there, said Terrence Quinn, senior vice president of Peoples Bank in Munster.

“There are many habits people can develop to enable them to save regularly,” he said.

Here are a few ways you can wipe the slate clean and start the New Year on the right financial note.

Create a budget

“A spending plan, or budget, is the basis for effective money management,” said John Gibson, director of graduate and undergraduate programs at the Indiana University Northwest School of Business and Economics.

If anything changes occur in your life – major or minor – be sure to update that plan, he said.

“Changes in income, living expenses and goals will require changes in your spending plan,” he said.

Keep a diary

Keeping a detailed personal spending diary is a great way to find money, Gibson said.

“Many people are surprised at how and what they are spending,” he said.

While an old fashioned notebook can work, there are also a wealth of apps and web sites created, like mint.com, to do the work for you.

“If you are a debit or credit card user, your online statement is also an easy way to see what you are spending on,” Gibson said.

Watch that coffee

Do you have the habit of stopping for coffee in the morning on your way to work?

“If you do this three times a week at $3 to $4 each, you will find you are spending $40 to $50 a month on coffee,” Gibson said. “You can have the same thing practically by making it at home for pennies.”

Other ways to easily spend a lot without realizing it include dry cleaning and eating out.

“People intuitively know that making a lunch at home is cheaper than buying one,” Gibson said. “I think the key here is we are paying a premium for convenience. Convenience is the killer app of the day, but that app costs more than we think.”

Participate in a 401(k)

If your employer offers a 401(k) plan or other savings program at work, Quinn advises to participate and if possible, to increase the percentage set aside each year.

“These dollars are deducted from your paycheck before any taxes are computed,” he said. “Since the dollars saved do not show up in your take home pay, you don’t miss it.”

Empty your pockets

If it’s difficult to set aside money each month for savings, Quinn suggests simply emptying your pockets at the end of the day.

“Every evening, take all the change out of your pocket or purse, and put the coins in a jar, drawer, whatever,” he said. “Then every month or so, deposit the coins into a savings account. You’ll be surprised how much in coins you carry.”

Another variation of this idea is to save coins and $1 bills each day – essentially refusing to spend the leftover change you get after making purchases and putting that money away in savings.

Pay yourself first

With each paycheck before you pay any bills or go out for dinner, your first payment is to yourself of a predetermined amount, Quinn said.

“Some people set aside 5 or 10 percent right off the top,” he said.

Create a future

A regular savings program for you or your children can make a huge difference for the household finances over time, Quinn said.

“It’s tough as we all have bills and other obligations, but if you are able to do so, it can lead to financial independence in the future,” he said.

For children, he suggests opening a 529 college savings plan for each child.

“The money grows tax-free, and can be transferred to another child if the first child does not need the funds for college,” he said.

Copyright 2014 nwitimes.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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