Saving money is extremely important to your financial future and success. Many people don’t realize this, and they literally spend more than they make. Instead of putting away any excess cash they have, they actually spend that money and then some, putting themselves into deeper high interest credit card debt and other types of negative equity situations.
It’s the typical problem about the idea that we have to have material goods here and now. Instead, what people should be practicing is something called delayed gratification. Instead of putting a deck on our house now, which I know we could do with a line of credit on our house, for example, we are choosing to delay this project in favor of paying off high interest debt first, and also of saving for your future in tax deferred instruments like 401k’s and IRA’s.
This way, we are actually paying ourselves first instead of dumping money into something that isn’t really paying us. Probably the single most important factor in saving money is keeping it “out of sight, out of mind”. This means that your money comes right out of your paycheck and into a savings account, automatically, with no interference from you. With this method, it’s automatic, and you don’t even think about it or have a chance to spend it before it’s deposited into an interest bearing account.
401k’s and similar work-savings for retirement programs work this way. They simply draft the money right out of your paycheck, thereby reducing your taxable income by that much, and you don’t even see that money in your paycheck, it’s just automatically gone, into an account that pays you interest, dividends, and whatever other capital your account happens to appreciate by depending on your investment choices.
You can also do this with different types of savings accounts too, if you want to have say an extra fund set up for emergencies or for something bigger that you want to save up for that you don’t want to pay for on credit. Sharebuilder and other online savings, banking and investment services, have bank accounts that you can set up this way, or your local bank can often draft money directly from your paycheck into a savings account, so you don’t even have to think about it on a monthly or bimonthly basis. ‘
This sure beat the old money between the mattresses trick, where it’s as easy and going over to pull some cash out for temptation’s sake, and you’re not earning a penny in interest!