Five Saving Strategies
1. Pay Off High-Cost Debt
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. With accumulating interest, you will pay more than $10,000 in interest charges.
2. Save for Emergencies
Having an emergency savings fund may be the most important difference between those who manage to stay afloat and those who are sinking financially. Without an emergency fund, you may find that need to turn to high-cost credit cards or payday loans to cover the amount you owe. Borrowing from these types of lenders could make it difficult for you to payback your debt and save successfully.
3. Save for Retirement
Saving now for retirement will ensure that you have enough money to live a comfortable lifestyle when you stop or reduce the amount of hours you work. You may be able to save for retirement through your workplace through a 401k plan or you can save on your own by putting money in an Individual Retirement Account (IRA).
4. Save Automatically Through a Monthly 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. Buy a Home and Pay Off the Mortgage Before You Retire
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.