Things To Think About

Five Reasons to Start Saving Now

1. Getting started is the hardest part. Momentum works for your finances just like anything else. If you "pay yourself first" by moving the money out of your checking account right away, you could be surprised by how little you miss it.

2. It will make you happy. Working toward your financial goals is a gift to yourself. Enjoy it! You're looking out for your future, taking care of your family, and making your money work harder for you. That's a great feeling.

3. You'll have more time to think through your options. Starting now will give you as much time as possible to test out your plan and change tactics if you need to. If you aren't ready to take action just yet, take a bit of time to read up on the possibilities (like which college savings accounts may provide you with more tax advantages) so you can move ahead with confidence when the time is right.

4. Compound interest is a force to be reckoned with. If your goal involves putting money aside make compound interest work for you. The longer your money sits in an interest-bearing account, the more money it will earn you.

5. Life happens faster than you expect. Start saving now, while you're thinking about it. Start small if you want to. Now is the perfect time to make sure you don't miss any opportunities to grow your money.

Making a Savings Plan You Can Stick To

Whether you're trying to get out of debt, save for retirement or accomplish any other financial goal, you need a plan. Making a plan you can stick to takes several steps:

1. Know where you are now. Before you do anything else, make a quick list of all your goals. This is also a good time to start tracking your spending and make a list of any debts you might have.

2. Prioritize your goals. Think about which of your goals are most important to you and which are the most urgent. Fund the most important first.

3. Break up big goals into smaller ones. Dividing up a huge goal gives you more victories to celebrate and also makes the goal feel more real.

4. Keep it realistic. It's better to meet a good goal than fall short of a great one. If you do a thorough job on the first two steps above, you'll have all the information you need to create workable, realistic goals.

5. Be open-minded. If you don't have enough money to meet your goals, you'll need to tweak your plan further. You might need to change some of your money habits or adjust your goals, or both.

6. Examine and readjust. Once you've put your plan in motion, keep an eye on it to make sure it runs smoothly. It's good to revisit your goals a couple times a year - to tweak them or just inspire yourself.

How to Track Your Expenses

Follow three simple steps:

1. Every time you get money or spend it, document where, what, when and how much. (Free online tracking tools: Mint, Yodlee, Wesabe or iXpensit app for iPhones.)

2. Write out a list of categories for your spending. You can include whatever categories make sense to you. (For example, some people might have groceries, dining out, work lunches and snacks. Others might just have food.)

3. After a few weeks, add up how much you spent in each category. Take note of any expenses that happen repeatedly, and start to plan for them so you aren't taken by surprise.

How to Stop Living Paycheck to Paycheck

1. Change your mind. Living paycheck to paycheck is basically a countdown to zero. Build an emergency fund so that getting close to zero will feel uncomfortable.

2. Start an emergency fund and add to it regularly. This will be the cushion that floats you through hard times, unexpected problems and other money troubles. If you take it slow, you could very well find that you hardly miss the money. Over time, you can increase the amount you put into your emergency fund.

3. Pare down your expenses. Take some time to track your spending, so you know exactly where your money goes. You might find that making a few simple changes can free up a small chunk of money each month, which you can add to your cushion.

4. Increase your income. Sell things on eBay or Craigslist. Volunteer for overtime. Pick up a part-time job. Ask for a raise. Whatever it takes to pad your checking account, do it.

The Ins and Outs of Emergency Funds

Emergencies happen. There's no way to predict them and often no way to avoid them, so you might as well plan for them. An emergency fund is a great way to do that.

How Much Should I Save?
The ultimate goal for your fund depends a lot on your circumstances. If you've been living paycheck to paycheck or are in debt, start with a goal to build up $1,000 as your emergency fund. Eventually you'll want to keep three to six months of expenses in your fund - more if you have children, are the sole breadwinner or are self-employed.

Why Not Just Rely on Credit Cards?
Credit cards can be truly helpful in an emergency - there's no denying it. But if you need to use them, you'll probably end up paying interest. With an emergency fund, you'll earn interest.

Where Should I Keep It?
Accessing the money in your emergency fund needs to be quick, easy and free. One great option is to have a high-yield savings account linked to your checking account. Transfers tend to be fast, and you'll still earn interest. For larger emergency funds, you might try a money market fund or a mutual fund (preferably a lower-risk type, like a bond fund).