Saving
money is not that difficult, as many of you think. In fact,
for most of you saving money is very easy, it's just that
you are not aware of your options according to the Internal
Revenue Service.
1. Pay off your most expensive debt first. The best investment
most borrowers can make is to pay off consumer debt with
double-digit interest rates. For example, if you have a $3,000
credit card balance at 19.8%, and you pay the required minimum
balance of 2% of the balance or $15, whichever is greater,
it will take 39 years to pay off the loan. And you will pay
more than $10,000 in interest charges.
2. Purchase a home and pay it off before retirement. The
largest asset of most middle-income families is their home
equity. Once these families have made their last mortgage
payment, they have far lower housing expenses. They also
have an asset that can be borrowed on in emergencies or converted
into cash through sale of the home.
3. Fund your employee retirement program or loose. Many
employees turn down free money from their employer by not
signing up for a work-related retirement program such as
a 401(k) plan. If they did participate, with a dollar-for-dollar
match they would likely receive an annual yield of greater
than 100% on their investment.
4. On your own, save monthly through an automatic transfer
from checking to savings. These savings will provide funds
for emergencies, home purchase, school tuition, or even retirement.
Almost all banking institutions will, on request, automatically
transfer funds monthly from your checking account to a savings
account, U.S. Savings Bond, or stock mutual fund. What you
don't see, you will probably not miss.
5. Earn over 4% on some certificates of deposit (CDs) and
on U.S. Savings Bonds. Some CDs from a bank or credit union,
and Series EE and Series I Savings Bonds, currently pay between
4% and 5%. A savings deposit earning 5% will double in size
in less than 15 years.
6. Learn and understand low cost mutual funds. If you choose
the right mutual funds you can increase your wealth substantially
over the years. Some mutual funds have horribly high cost
and use high risk stocks to fund them. Learn how to evaluate
low risk, low cost mutual funds as a means of investing.
Lois Center-Shabazz is the founder
of MsFinancialSavvy.com and author of the 3-time award-winning
personal finance book, Let's Get Financial Savvy! ISBN #0971979502.
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