You know it’s important to save money, whether it’s for an emergency fund, your retirement, or to buy something special. But it’s not always easy to stash any spare cash.
Consider yourself a creditor. When you pay your bills, write a check to yourself. Decide on a realistic amount. Deposit the money into a savings, investment, or retirement account. Then, pay your other bills as usual. If you find that you don’t have enough money to cover all your expenses, write down the amount you are short and look for ways to trim your budget: Borrow books from the library rather than buying new; brew your own coffee rather than buying it; consider raising the deductible on your auto insurance; buy store brands instead of name brands; cancel subscriptions to magazines you don’t read or can find at the library or online.
Once you establish a regular savings plan, consider increasing your monthly deposit if you get a pay raise, or when you pay off a debt. For example, once you pay off your car loan, student loan, or other installment debt, deposit that amount into a savings account. Once your toddler is out of diapers, deposit the amount you spent on diapers into savings. You won’t miss the money if it’s put into savings, but more than likely, you’ll find a way to spend it if it’s in your checking account.
If you need some fast cash, consider selling items around the house you no longer use, either online, at a garage sale, or at a local consignment shop. When you sell online, you may use an auction or classified ad site. Check the sites for policies and procedures. When you agree to consign items to a shop, you’re a consignor. You still own your stuff, but you give the shop the right to sell it. The shop becomes the consignee. When the items sell, you get a percentage of the selling price that you agreed to in advance. A profit split of 50/50 or 60/40, with the higher percentage going to the shop, is typical.
Avoid payday lenders. A payday loan is a cash advance secured by a personal check or paid by electronic transfer. It is very expensive credit. How expensive? Say you need to borrow $100 for two weeks. You write a personal check for $115; $15 is the fee to borrow the money. The check casher agrees to hold your check until your next payday. When that day comes around, either the lender deposits the check and you redeem it by paying the $115 in cash, or you roll-over the loan and are charged $15 more to extend the financing 14 more days. If you agree to electronic payments instead of a check, here’s what would happen on your next payday: the company would debit the full amount of the loan from your checking account electronically, or extend the loan for an additional $15. The cost of the initial $100 loan is a $15 finance charge, which works out to an annual percentage rate of 391 percent. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.