500 Great Ways to Save For Dummies
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If you're like many Americans, you're living paycheck to paycheck with almost no money in savings and a lot of credit card debt. To get on track financially, follow these 7 simple steps for getting out of debt, saving for your future, and living the life you've always imagined:

  1. Make a new budget every month. It's time to get serious. Sit down with your spouse and make a monthly budget based on your income, not your expenses.

    You are no longer going to be spending more money then you have. Overspending is what led you to debt in the first place. Decide each month what is coming in and what will be going out. Assume only minimum payments on all debts, but whatever happens, the income must be greater or equal to the expenses.

  2. Cut up your credit cards, From now on, you'll be using cash or a debit card for everything.

    If you have a credit card in your wallet, you will use it, so cut it up. You don’t need it anymore.

  3. Save $1,000 fast. This is your starter emergency account. No matter what other bills or obligations you have right now, set this money aside in a money market or savings account first.

    While you're working to pay down debt, your emergency account will prevent you from whipping out your credit card in an emergency. Your car breaks down, the hot water heater dies, or the roof leaks — all good reasons to access money. Your emergency account is not fun money and should never be used for anything that is predictable and not vital in your day-to-day life. Christmas, Birthday Parties, or an LCD television all fall into "budget-for" category.

  4. Contribute to your 401(k) only enough to maximize the employer match. Once your $1,000 emergency fund is neatly tucked away in a safe location, adjust your 401(k) contribution at work to take advantage of all the free money the employer gives you.

    Usually, your employer will match your 401(k) contribution up to a certain level (typically, a percentage of your salary). Example: If your employer matches 50% of the first 5% of contributions, contribute 5%. If your employer matches up to 3%, then contribute only 3%.

    The best return on your money is a risk-free match from your employer; take full advantage of the free money. If you do not have a 401(k) or an employer match, skip this step. Remember, you should not be working on the next step until you have completed the previous one. If you are contributing to your 401(k) and the breaks on your car need to be repaired and the cost is $500, pay for your breaks but then go back and make sure you bring your savings back to $1,000.

  5. Pay off your debt. Now that you have $1,000 squirreled away and are making a matching contribution to your 401(k), it's time to tackle your debt.

    Make a list of all your debts, excluding your home mortgage. Your debt list should include car loans, credit cards, student loans, and so on. Then, put those debts in order from smallest to largest. It doesn’t matter if you have a $20,000 loan at 24% and a $500 loan at 1%, the $500 debt comes first on the list.

    Start by making the minimum payments on all your loans, except for the first one on your list, the smallest loan. On this loan, pay as much money as you can every month and focus all your energies on getting it paid off. Once that first loan is paid off, take that money you were paying monthly and begin to aggressively pay off loan #2. Continue right on down the list until all of your debt is completely paid off.

  6. Increase your emergency savings to 3-6 months’ worth of expenses. Now that your debt is all paid off, saving money should be a breeze.

    Consider saving 3 months of expenses if your income is fairly secure and 6 months if your income fluctuates or is commission based. This money also should be in a savings or money market account. Don’t worry about the interest rate; just make sure it is safe and easily accessible.

  7. Increase retirement savings up to 15% of income.

    Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps. This savings will grow with tremendous tax advantages and help provide for your future.

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