Steps to Save Money

Who ever said that saving money involves complicated steps and complex computations? It’s you who usually complicate matters with thinking too much, putting too much pressure on yourself, and getting too meticulous for your own good. When saving money, all you need to do is follow some simple rules, stick with them, and then wait for the right time that you will reap in all the profits of your hard work.

First step, as soon as you can sign up for your retirement savings plan at work. Don’t go and deposit all your present savings on CDs. You’re priority should be to sign up in a 401(k) or similar tax-deferred savings plan your company has. Why? For the basic fact that any money you put on such savings plan will not be taxed until you withdraw it. Also, by signing up for such employer’s saving/retirement plan, you will be deducted automatically making it easier to save some cash.

If a 401(k) or similar plan is not presented as an option, you have the IRA to fall back on to. Your choices would be a traditional IRA and a Roth IRA. The traditional deducts taxes from your contribution while the latter does not. If you’re still young, go with Roth IRA.

I’ve already given you two very simple tips that will make saving a lot easier. First, invest in a any tax-advantaged savings scheme that your company or the government has to offer. And second, apply for automatic payroll deductions to do away with monthly writing of checks or bank deposits.

Second step that you need to consider is to invest some of your money in a simple yet quite lucrative undertaking. If you can’t understand how an investment works, its better to avoid it altogether rather than being caught right in the middle of a complicated situation where you can no longer go back since you’ve invested quite a lot already.

Third tip, put your money into stock mutual funds. In the long run, mutual funds will earn better profits than any other stock options available. But, it is still good to mix up your investments. You don’t need to invest half of your money on mutual stocks. You can always diversify. That’s your fourth saving tip.

Third step, it would be to your advantage to keep your original plan as is. If you have some profits from your 401(k) or IRA plan, don’t go off upgrading or improving your investment. You might end up not earning as much as you have expected. Remember to keep your life simple. Performing normal and routine maintenances on your plans are usually more than enough to keep your savings at check.

Fourth step, don’t let your knowledge about saving procrastinate. What I mean by keeping it simple is not to overload yourself with complicated information from the start. Gather information gradually and learn about things slowly.

 

Posted by Ardent Editor on Jun 28 2007 in Financial Planning

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