Smart ways to bigger savings

It is a no secret savings boost one’s net worth. Lack of savings can result in unstable financial future even for the riches. Who does not have any expenses? Because everyone has expenses, money has to come from somewhere. If we are not careful with our money, we will sooner or later find ourselves using money that was set aside for savings.

Think of a foam cup analogy that relates savings and spending of an average consumer. Suppose our cup will hold cold water just like a safe box (or a bank account) holding cash. The goal is to fill the cup or safe box to max and keep it filled as long as possible. Although we can add unlimited amount of water to our cup, we will constraint the flow into it to reflect how much money the person can add to the safe box. Conversely, to reflect one’s expenses suppose bottom of the cup has a hole corresponding to the one’s expenses. While a large-sized hole indicates high amount of money leaving the safe box, a small-sized hole indicates reasonable amount of money is leaving the safe box.

To go further with the analogy, when pay increases, it increases cash going in -- which in turn assume increases water to the cup. This does not mean the cup will be full. Remember the hole in the cup? The hole will continually pour water out. If there is a sudden expense increase, it will need to be reflected in our analogy, specifically the hole will be made bigger.

It should be now clear that the cup will become full only if the flow of the water going in is greater than what it is coming out of it at the bottom. Otherwise, the cup will become empty eventually. Likewise, the safe box will get full or hold cash as long as the flow of money going out (expenses) is less than what is coming in.

How much one decides to save and spend is a personal decision. Hopefully, whatever it is – is a smart decision for that person. If savings is on top of your list, let’s discuss a number of ways you can immediately start put them into use:

Don’t through away a bank check even it is worth only pennies!

• Reduce the balance on credit cards or loans that charge high interest. The savings you realize from this move can be huge depending on the gap between the original interest rate and the new interest rate.
• Avoid paying bills early. Pay bills when they are due. This can be easily done if you have an online account because you can select the date when the money is ought to come out of your bank account. Paying bills early reduces interest your money can earn.
• Conserve on your energy use. Having an energy-efficient home can yield utilities bills by as much as 25%.
• Consider putting large amounts of cash or deposit checks immediately to your bank account. This helps you earn interest that you would miss if it stayed out of bank account.
• Avoid excess withholdings from your pay check. Although this accumulates in to refund in April when you file a tax return, you don’t get any tax or money benefits for doing so. If that money was instead deposited in to an interest-bearing account, your money would have earned your interest. Plus you would have had access to the money whole year.
• Shop for insurance rates. Life insurance, home insurance, and car insurance rates can vary considerably from company to company.
• Establish good money-savings habits regardless of the saving amount. A few cents saved probably won’t make anyone rich but it is a helpful technique to develop savings habits that leads to more saving awareness.

Posted on: 8:26:13 PM EDT October 5 2007

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