Strategies for Saving

Inventor Thomas Edison once said, “Genius is one percent inspiration and 99 percent perspiration.”

The same could be said for saving – although finding that 1 percent inspiration to actually start saving can be very difficult. So how do you develop a savings plan that helps you reach your long-term goals while minimizing the impact on your lifestyle?

First – you need to find that inspiration. What are you saving for? Retirement? A home? A college education for you or someone in your family? A car? However you define your objectives, a little effort and thrifty behavior now can repay you handsomely in the long run.

• The Securities and Exchange Commission offers an online guide to help you define your saving and investing goals.
• The New York State Consumer Protection Board has an initiative they call their Stretching Your Dollars Effort (SYDE) to help consumers who are trying to make their dollar go further during these challenging economic times.

Whatever the goal, there is one simple rule that you should try to incorporate into your daily financial behavior: Pay Yourself First!

Maybe you owe money to your landlord (or mortgage lender), and to a whole range of others upon whom you rely each day for products or services. But you have worked hard for your money and you are also entitled to some of that money (even if it’s just a few dollars each week). You need to put it somewhere that’s safe and that gives it a chance to grow – such as a bank.

• The Bank Find program, sponsored by the Federal Deposit Insurance Corporation (FDIC) which insures deposits in banks and thrift institutions, allows you to quickly locate an FDIC-insured institution. Remember, with FDIC insurance, when a bank fails, each depositor's account, dollar-for-dollar, is insured up to the FDIC’s insurance limit, including principal and any accrued interest through the date of the insured bank's closing.
  
• If you do business with a federal credit union, the National Credit Union Administration (NCUA), the independent federal agency that charters and supervises federal credit unions throughout the United States and its territories, insures your deposits. The NCUA has developed a toolkit to help you understand the extent of your insurance coverage.

Once you’ve established a relationship with a financial institution, you may want to consider these savings strategies as well:

Pay down high interest debts first

Compare the interest rate on your savings account with the interest you’re paying on debts. Chances are that your debts have significantly higher rates – which means you should prioritize paying off those accounts.

Look into retirement savings opportunities at work

Deferred compensation plans, such as 401(k) accounts, allow you to make tax-advantaged contributions to these accounts. These plans typically offer a range of investment options, so you can balance the potential for growth against your tolerance for risk. Although there are no guarantees on the return you may get over the long term, they do provide you with an upfront tax advantage by lowering your taxable income.

Reduce your tax burden

The federal and State governments allow you to reduce your tax burden through Health Savings Accounts, Dependent Care Accounts, 529 College Savings Accounts and a range of other programs. Legally reducing your taxes is a great way to hold on to more of your hard-earned money.

• The U.S. Department of the Treasury offers information on Health Savings Accounts, which were created in 2003.
• The IRS offers information on Medical Savings Accounts, Flexible Spending Arrangements and Health Reimbursement Arrangements.
• The New York State 529 College Savings Program Direct Plan provides a low-cost way to save for college. The program features a wide range of investment choices, tax-free withdrawals when the money is used for qualified higher-education expenses and contributions that are tax-deductible (up to certain limits) for New York State residents.

Avoid fees

ATM fees can add up quickly. A simple change in how you manage your cash (or a change in financial institution, if there are no in-network ATMs near you) could save you hundreds of dollars each year. In addition to ATM fees, by paying your bills on time, not overdrawing your credit card accounts and comparison shopping for financial services (such as finding a bank with free checking), you can eliminate pesky little fees and keep more of your money where it belongs – in your pocket (or, preferably, in your bank account).

Consider making lifestyle changes

According to a report issued by Comptroller DiNapoli, obesity costs New York State more than $6.1 billion annually in health care costs. In addition, certain lifestyle decisions, such as choosing to smoke, carry with them a hefty financial price tag along with the negative health consequences. By taking the difficult steps now to address these challenges will help you live a healthier life now and could lower your costs in the long run.

 

 

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