Before you pay that bill, pay yourself first
The old advice, "pay yourself first," is still good advice today. Saving is an important piece of building your financial security. Consider savings as a fixed expense similar to the rent, mortgage or utility bill. Put away some money in savings before you do anything else with your paycheck. Pay yourself first. That means each month, before you're tempted to spend money, commit to putting some of your money into a savings. You can write out a check to be deposited into your savings account, but it's much easier to arrange with your bank to do a regular automatic transfer of a certain amount from your paycheck or your checking account into savings. An important savings goal is to establish an emergency fund, setting aside enough money to cover your basic living expenses for three to six months. This money should be kept in an easily accessible savings or money market account. Only use the money in the event of an emergency, such as receiving unexpected medical bills or losing your job. Saving is often difficult to do, so here are some tips to help make saving a habit: If your employer offers payroll savings, enroll. If your employer offers such tax-saving accounts as a flexible spending account for medical expenses, enroll. When you contribute money to a 401(k), health savings account (HSA), or flexible spending account (FSA), you are contributing pre-tax dollars. So, for example, if you contribute $100 pre-tax a month, your paycheck could be $40-$60 dollars less. If your employer offers to match retirement savings, take advantage of the gift. Matched saving is one of the best tools for achieving optimum long-term benefits. Open a 529 college savings plan. This will allow you to save for your child's college education free from federal income tax. Turn a debt payment into a deposit. If you pay off a debt, such as the outstanding balance on a credit card, or if you make that last loan payment on your car, put that money to work as part of your savings. Save windfall income. The theory is simple. You got along without the tax refund or gift, so why not save it? A similar tip is to save monthly loan payments after a loan is repaid. Once you are in the habit of saving and seeing your account balances grow, saving becomes easier. Set both short- and long-term savings goals and work toward them. Use the self-help website, www.smartaboutmoney.org to find practical articles, financial calculators, quizzes, worksheets, money-saving tips, discussion forums and other valuable resources to help answer commonly asked financial questions. Check out savings tools, financial planning calculators and information pages at www .choosetosave.org. You can also find more information on savings and other financial topics at www.mymoney.gov. Lynn Little is a family and consumer sciences educator with University of Maryland Extension in Washington County.