Bankruptcy

Starting a Savings Plan

By Editor

Whether you're recovering from bankruptcy or just trying to improve your finances, saving money is essential.

How to Save Money

The secret to saving is to do it little by little. This isn't winning the lottery, but over the years, the small amounts you sock away will accumulate.

Forced savings: If you don't think you can resist spending what you earn, consider a plan that forces you to save. Many employers offer retirement accounts that automatically deduct money each month from your paycheck. Or, if you have a mortgage, you're building equity in the home with every payment – another type of savings.

Mini-savings: Even saving toward specific goals can save you money. Consider opening a savings account strictly for purchases – a new car, a stereo, etc. Rather than paying interest on a loan, you can make a purchase when you have enough money in your account for a one-time payment.

Gradual savings: If you're like most Americans, you don't have much money left over after each paycheck to stash away. But that shouldn't keep you from hanging on to whatever you have. Even 20 dollars a month will accumulate with help from compound interest.

Why Save? Think About It.

The safety net. If you're hit by job loss, reduced income, divorce, injury or a natural disaster, you'll likely have unexpected expenses.

Many people who file for bankruptcy do so because some surprise cost overwhelmed them financially. A savings account can help you in a crisis.

The money-saver. As you know, if you've ever taken out a loan to buy something (home, car, etc.), interest payments add up quickly. If you have enough money saved to pay sticker price with no help from a lender, though, you'll save money in the long run.

Even if you have only enough savings to make a larger down payment, you can keep interest costs lower.

The money-earner. The beauty of savings accounts is compound interest: when you put money in a savings account, you earn interest on the principal amount (whatever you initially deposits) plus whatever interest your account earns.

So, the longer you let your savings account sit, the more money it earns you. And you don't have to lift a finger.

Full post as published by The Bankruptcy Blog on March 25, 2009 (boomark / email).