Save Money

"Anything that we can do to raise personal savings is very much in the interest of this country."

Alan Greenspan

What is Savings

According to Keynesian economics, the amount left over when the cost of a person's consumer expenditure is subtracted from the amount of disposable income that he or she earns in a given period of time.

For those who are financially prudent, savings is the amount of money that is left over after personal expenses have been met can be positive.

For those tend to rely on credit and loans to make ends meet, will have negative savings.

Savings can be turned into further income through investing.

Saving for your goals

Once you've established what your financial goals and their time frames are, you need to decide how you can accumulate the money to realize them.

Short of working around the clock, there are two possible ways to increase your wealth: saving and investing.

You'll probably want to do some of both.

Saving, which means setting aside money for the future, may be the hardest part of financial planning, since you'll have less to spend on your current needs than you do now.

But making regular additions to a savings account is the surest way to move forward toward your goals.

Ideally, you'll be able to save 10% or more of your pretax income. On an income of $ 50,000, that's $5,000 per year or $417 each month.

But if that seems out of your range, it's a good idea to commit as much as you can, beginning as soon as you can.

Investing, which means putting money into assets like stocks, bonds and mutual funds, can help you earn more on what you've already saved than simply leaving it in a savings account.

That's because the return on most investments averages more over time than the return on savings accounts.

The catch is that making any kind of investment means taking a risk that you could lose
some of your principal, especially in the short term.

But not investing carries risks too because money that's not earning more than the rate of inflation loses its buying power and can leave you short of your goals.

Investing and saving

Rather than making saving and investing decisions in a vacuum, with a financial plan you choose specific types of accounts and products within those accounts to meet specific goals.

The most obvious is probably taking advantage of tax-deferred and tax-free retirement plans where you can invest for long-term growth and income.

Your employer may offer a 401(k) or similar plan at work, and if you earn income or are married to someone who does, you can take advantage of an individual retirement account or individual retirement annuity.

TIP

One way you might be able to save more is by paying off your credit card debt and contributing an amount equal to your average monthly finance charge to your savings account instead of owing it to a creditor.