Student Loan Debt: How Much is Too Much?

Student Loan

Some call it the Student Loan Bubble — I call it crazy. And what better time to discuss student debt insanity than now, as countless soon-to-be graduates prepare to slip on their caps and gowns? An estimated 1.8 million students are graduating this year, many with degrees that perhaps aren’t worth a damn when it comes to actually get a job. Nevertheless, many of them will soon be paying back the tens or hundreds of thousands of dollars they borrowed to get those nice degrees, and I wonder how many will regret the decision to spend what they spent as they see their interest compound and principals skyrocket through cycles of deferment and forbearance. The college experience can be an amazing one, but is it really worth the cost? (And I’m not just talking about tuition.)

To get at the heart of this question, I recently commissioned a poll that asked adults of all ages about student loans. We asked how much student debt is okay, and how much is too much. One in five senior citizens and almost a quarter of adults between the ages of 35 to 49 agree that $20,000 to $50,000 in student loan debt is too much to borrow. Maybe that’s because they are in the age range of folks in a position to hire young people. Maybe it’s because the college didn’t use to cost so much. At any rate, people of college age, between 18 and 24, disagreed with the old folks; only 16 percent said graduating with that much debt is too much.

Many respondents believe there should be no limits at all. Among recent graduates, 22 percent agreed that students “should borrow as much as they need,” and “no amount is too much.” Baby boomers and seniors overwhelmingly disagree — only 7.9 percent of people aged 65 and up agreed that college students should borrow to the hilt. It seems the marketing of “Don’t Worry, Pay Later” has been a success — at least in younger demographics.

Clearly, many college students and recent grads take a more cavalier approach to student loans than their parents and grandparents. Research shows that many even consider high debt loads to be empowering and give them higher self-esteem. Conversely, young adults

—folks who have labored a few years into the real world — are less enthusiastic about borrowing so much; 73 percent say they owe more in student debt than they can manage.

“It’s not surprising that the generation that has to borrow a lot more for college believes it’s a necessity for others,” says Lauren Asher, president of the Institute for College Access and Success. “There’s been a big structural shift in how Americans pay for college, and the cost that students and families have to pay has increased.”

Young adults back their beliefs with more student debt. Just shy of half the respondents — 46.8 percent — between ages 18 and 24 said they have borrowed money to finance a college education. That’s the highest level of any age group. About 40 percent of adults aged 25 to 34 took on student loans, and under a quarter of all Baby Boomers did.

Loan totals are going up, too. Young adults reported a median debt of $38,100. That blew all other age groups out of the water. Middle-aged adults said they borrowed about $25,000 for college. The average college student has about $26,600 in debt, according to the Project on Student Debt, a 40-percent increase since 2002, and it’s time to find a way to start paying it down.

Today’s bad economic climate makes this pretty scary. The unemployment rate for Americans dipped to 7.1 percent in April. But joblessness among adults ages 20 to 24 remains mired at 12.5 percent, according to the Bureau of Labor Statistics. When you add in all the college grads working as baristas, waiters and other jobs that don’t require a degree, about 1.5 million bachelor’s degree holders — 53.6 percent — under age 25 are unemployed or underemployed, according to a study by the Associated Press.

High college debt mixed with low job opportunities equal economic fallout. And if you are wondering why young people are taking on the debt: high school graduates face a jobless rate twice that of college grads.

Signs of stress are already showing. More than half of all student loans are now delinquent or in deferral. According to the latest report from the U.S. Department of Education, over 13 percent of graduates default on their loans within three years of leaving college.

So, riddle me this: how do you buy a car, a home, or start a family (i.e. put the “consumer” into our “consumer economy”), if you can’t even afford a monthly student loan payment? You already know the answer. And so the economy will continue to stagnate, with demand flagging along with everything else.

As President Obama and Congress dither over federal Stafford loan rates possibly doubling to 6.8 percent, they have done nothing substantive about the real problem: The Great Recession and a competitive technology job market that colleges and college lenders aren’t catering to. This is the problem that has already killed millions of middle-class jobs that are never coming back.  And until our lawmakers get busy on a solution, it’s only going to get worse.

The new economic age of big, portable, sharable data is here, yet many American students today are still preparing for the economy of the past. Rather than slashing investment in higher education and scientific research, we should be adding to it. We should also be seeking innovative ways to keep a lid on tuition increases while simultaneously working to help millions of American graduates win the kinds of good-paying jobs they’ll need to pay their loans.

The New and Improved Way to Save Money

Picture this: You’re in line at Target, ready to check out—and somehow you have a cart full of stuff when all you came for was toothpaste and face wash.

You know you don’t really need all those other things, but the yoga pants, flower socks, hair wrap, and holiday table linens were just too cute to pass up.

So you check out and end up spending $150.

Then you feel guilty because you know you should be saving that money instead of spending

it.

Sound familiar?

Chances are, if you’re like most modern working women, you know you need to save money

for the future—yet somehow there’s never any money left at the end of the month.

So instead of constantly beating yourself up for not saving every month, learn this simple approach and then spend money guilt-free—a win-win solution.

The old way of managing money

every month was to pay your bills, spend your money on fun things like going out and shopping, and then save whatever was leftover.

Old Way: Save What’s Left Over

Net Income (after-tax income)

-Bills

-Spend money on fun things

=Save whatever’s leftover

This approach never works long-term.

It’s just too hard to save money at the end of the month when we live in a world of immediate gratification.

So stop making it so hard.

Simply shift your mindset and follow the new approach to managing money: The “Pay Yourself First” strategy.*

New Way: Pay Yourself First

Net Income (after-tax income)

-Bills

-PYF Savings (Cash cushion, retirement, travel goal)

=Spend money on fun things (guilt-free!)

Automate your savings so they’re just like another bill that you must pay every month.

After you pay your bills and  Pay Yourself First, you can spend the remaining amount of money on whatever you want, guilt-free.

If you want to go to Target and spend $150, go for it. Or maybe you want to buy that new designer bag that costs a lot of money.

Do it.

You may have to eat ramen noodles the rest of the month, but at least now you’re being a smart, financially wise woman who is saving first and spending last.

Of course, you can’t spend more than what’s left over every month, otherwise, you’ll be creating debt–and we know that’s not good.

How much should I be saving?

A good rule of thumb is to save 10-20% of your net income toward your top three financial goals for the year.

However, if that’s too much for you, start small.  Maybe start with 3% and work your way up by increasing the percentage by 1% every six months until you reach the desired level of 10-20%. 

Take Action

This approach sets the foundation for your financial success long-term.

It makes it super easy for you to save money and not feel guilty about spending what’s leftover.

So now it’s your turn.

Work on setting up your Pay Yourself First strategy and start saving the easy way.

Set up automatic savings toward at least one of your financial goals today.

This could be as simple as putting $50 per month into your savings account to build your cash cushion.  Or it could be contributing $100 per month into your Roth IRA.

Whatever it is, just make it automatic.

You’ll be surprised at how you won’t even miss that money once it’s automatically deducted.

10 Simple Strategies to Simplify Your Life

You probably know the feeling.

It’s one of the walls closing in on you because you have too much stuff. It’s the panicky thought you’re forgetting something important as you run out the door. It’s the desire to somehow find that happy place where you envision you’ll be the perfect parent with the perfect home.

With modern lifestyles pulling us in all directions and entire television networks devoted to creating home envy, it’s no wonder we are feeling overwhelmed and stressed out by our busy lives and cluttered homes.

UCLA researchers even wrote a book on the subject, finding many families had garages too full to accommodate cars, backyards that are never used, and mothers with elevated stress hormones.

If you’re ready to step off the hamster wheel, watch Money Talks News finance expert Stacy Johnson’s video, and then keep reading for more simple strategies to simplify your life.

1. Consolidate your accounts

It’s hard to say no to the $100 bonus for opening a checking account when the new bank comes to town or to pass up the great sign-up offer available from the latest rewards credit card.

Before you know it, you could have a half dozen accounts at various institutions. Your IRA is in one place; your checking account is in another. Then, you have your mortgage, emergency savings, and insurance products to juggle too.

Rather than have your accounts scattered to the wind, try to consolidate them in a couple of places. Pick one bank for your money and credit and one company for all your insurance needs. In the end, you not only have fewer accounts to manage, but you might also get better rates or terms for bringing more of your business to a particular institution.

2. Purge the paperwork

Consolidating accounts is only the first step. Next, you need to purge the paperwork.

That means signing up for paperless statements, which are now offered by nearly every financial institution. Then, with the exception of a few vital documents such as birth certificates and titles, you can scan and shred almost everything else in your filing cabinet.

For more pointers, check out this article with five tips for paperless finances.

3. Pay cash

Whenever possible. Don’t underestimate the power of cash to simplify your finances.

Not only can paying with cash prevent you from overspending, but it also eliminates much of the stress of daily money management. There’s no more remembering to save receipts and record transactions and no more worry about whether your card will be declined because the fuzzy math you did in your head isn’t quite right.

4. Automate your life

Remembering to pay the bills

on time can take up a lot of headspaces. Free yourself from the anxiety of getting the mortgage in on time by automating your finances.

First, if you’re not being paid via direct deposit, you need to sign up if it’s an option. Some employers will let you split your paycheck among two or more accounts. If that’s possible, send at least 10 percent of your earnings to your savings account.

Then, use a bill pay service to automate your monthly bills from your checking account. Depending on your bank and billers, you may be able to request bills be electronically delivered and the amount due paid automatically. Otherwise, you can set up recurring monthly payments.

For expense tracking, skip the spreadsheets and use an app or tracking software such as our partner PowerWallet.

5. Stop buying more stuff

One of the core principles of simple

living is minimalism.

The less stuff you have, the less time you need to spend maintaining, rearranging, and obsessing over what you’ve got. Plus, when you stop spending, you have more money for saving or for splurging on those things that are really important.

6. Declutter what you have

As the UCLA researchers discovered, clutter can make us stressed. Putting a stop to your spending sprees will curtail the flow of new items coming in, but now you’ve got to do something with all the stuff you already own.

Before you run out and invest in yet another organizational system or storage unit, consider boxing up all the excess and shipping it off to the thrift store or the landfill. Or you could sell what you don’t need. After all, simplifying can be good for your wallet as well as your state of mind.

7. Cut loose toxic and high-needs people

When we talk about simplifying, we need to discuss more than money and stuff. We also need to consider the people surrounding us.

Toxic personalities make our lives difficult. They steal our good days and put demands on our time and attention – time and attention that could probably be put to better use elsewhere. Consider how many times you’ve gotten off a phone call with a high-needs friend only to discover you’ve completely lost your mojo to get anything done for the rest of the day.

Do yourself a favor and cut off the emotional vampires who are feeding on your positive energy.

8. Reconsider your commitments

Juggling multiple activities is much more complex than focusing on one. Simplify your schedule by reconsidering everything on your calendar.

Ask yourself:

• Do I need to do this?
• Do I want to do this?
• Can I delegate this to someone else?
• What happens if this doesn’t get done?

In a world in which we wear our busyness like a badge of honor, saying no won’t come naturally at first. However, one of the keys to a simple life is an uncluttered calendar.

9. Unplug at least once a week

At least once a week, put away all the electronics. Power down the computer put away the phone and turn off the TV. Spend some time getting reacquainted with your paper books, an old hobby, or your backyard.

Unplugging has several benefits, but when it comes to simplifying your life, it helps by letting you slow down. Electronics tend to be very “in your face.” They can be loud, bright, and engaging, and when you’re constantly surrounded by them, it’s easy to lose track of time and start operating on autopilot.

Give yourself some quiet time to contemplate something a little more meaningful than whether Justin Bieber should be deported.

10. Create routines

Finally, a simple life thrives on routine. Without it, you may find you waste a lot of time and energy wondering what to do next.

Don’t confuse a routine with a schedule. A routine isn’t set in stone with time constraints. Rather, it’s a general idea of how your day will go.

A routine means knowing that you get up in the morning, have breakfast, load the dishwasher, and go for a walk. It could also be paying the bills on Monday, shopping on Tuesday, and doing your weekly dinner prep on Saturday.

Routines take the guesswork out of regular activities and, yes, make life simpler.

How to Appeal a Denied Credit Card Application

Have you ever applied for a credit card on the spot in order to take advantage of a great promotional offer?

You think you’ve been pre-approved, but that’s one of the common myths about these offers that come in the mail. What happens when your application is denied or held up for further review? Are you just out of luck?

Not necessarily.

Note: The scenario I just described is a prime example of why I encourage consumers to carefully research credit cards and their qualification criteria prior to applying to decrease the chances of a denial and avoid the ding an application can have on your credit scores. The denial won’t affect your credit scores, but the hard pull on your credit report when you apply for a new credit card will.

Fortunately, the initial denial can be appealed by taking a few simple steps.

Potential reasons for denial

Before I get to the process, it’s essential that we cover the potential reasons for the rejection of your application. Time is of the essence, so start by requesting a copy of the credit report they used to make the decision, along with a thorough explanation of why they turned you down.

In some instances, you may have a credit report or application error that can be reversed rapidly through an appeal, or perhaps a computer glitch generated a false rejection.

Here are some other reasons your application could have gotten the axe.

• Too many late payments. If you can’t make timely payments to other creditors, why should this company take a risk on you? In most cases, there is a grace period of 30 or 60 days before the issuer reports the delinquency to the major credit bureaus, so late payments in your reports indicate that you are having a difficult time managing the outstanding debt you already have.
• High credit utilization ratio. Swiping away, but making, say, only minimum payments each month? This is another red flag to creditors and demonstrates that you are biting off more debt than you can chew.
• Credit newbie. Too new to the credit card world? If you don’t have a track record by which the creditor can assess your creditworthiness, they may not be willing to take a chance on you. You can always try a secured card to help build your credit.
• Poor credit score. Credit card issuers typically set a minimum threshold for applicants. 

Limited income. A small paycheck could mean that you may be inclined to use your credit card without being able to pay it off in a timely manner. This obligation could quickly drop to the bottom of the list of monthly priorities if things get a little tight.

Employment history. Are there gaps in your employment history? Or maybe you’ve held a large number of jobs in a brief period of time. Either way, potential creditors may perceive your fluctuating income as a major risk factor.

Assuming none of those reasons applies, the next step is for you to plead your case to the credit card issuer.

Step 1: Pick up the phone

By doing so, it may be possible to speak with a company representative who has the ability to reverse the decision. During the call, you want to do the following:

• Explain how their product will help you accomplish your objective. Maybe you are new to the credit world and you have decided to begin your journey with their product.
• Put your other relationships at the forefront. Having this brand-new shiny piece of magic plastic is a good fit because you already possess a number of their other products — a bank account and a debit card, for instance.
• Be patient. They are doing you a favor, so a bad attitude can kill your chances.
• Stroke their ego. Emphasize that the features of the card best suit your needs.

Step 2: Mail the requested documentation promptly

If they aren’t willing to make a reversal via telephone but have agreed to give the application another round of reviews, be sure to send all of the documents that will strengthen your case as quickly as possible.

Step 3: Write a letter

You can also try writing a letter. It should include the following:

• Introduction and reason for the letter.
• State your case and why you are a good candidate.
• Contact information and a statement reiterating your interest.

Still no luck? You can always search for another piece of magic plastic or work on building your credit profile until you meet the qualification criteria.

Source: How to Appeal a Denied Credit Card Application

How I earn credit card rewards responsibly

The Rewards Card

The topic of maximizing credit-card rewards seems to be a popular one lately, especially in the world of personal finance blogging.

Many of us use our credit cards to pay our bills and monthly expenses. We earn cashback and rake in the rewards. Some of us have even mastered the envious ability to churn credit-card rewards to pay for awesome vacations.

Because personal finance readers are so financially savvy, we usually take for granted that, for many people, this is a dangerous habit. After all, the average US household credit card debt

is upwards of $15,000.

If you do it right, earning credit card rewards is a great money hack. Last year, for example, I earned $450 in cash-back. But you should have control of your finances before trying any kind of hack like this.

Let’s say you have control of your financial situation and you’re ready to play this credit-card-rewards game. How do you play properly? And what precautions should you take?

Here’s what’s worked for me.

Budget meticulously

I use a zero-sum budget, which is ideal when you use a credit card for monthly expenses.

Spending less than you earn is important anyway, but I think it’s crucial when you’re credit card churning. When I decided to start using a credit card

, I made sure to calculate my budget meticulously.

I double- and triple-checked that the grand total of my expenses was less than my monthly income. I also considered my quarterly and bi-annual expenses.

Once you’ve established a thorough budget, monitor it. And whatever medium you use to budget, include your credit card account in it. I use Mint, and my card is linked to my account.

I make sure to spend within the limits of my budget so that I don’t have to worry about overspending on the card. But, just to be safe, I also monitor my budget. I subtract my credit card debt from the amount in my checking account.

I make sure this amount is enough to cover the rest of my monthly expenses.

When I first started playing with credit cards, I didn’t budget properly. I didn’t use Mint, and I’d check my checking and credit accounts separately. Basically, I would just do the math in my head, which is a bad budgeting habit, according to the fuzzy-trace theory. So, of course, I would spend more than I meant to spend. I’d bust my budget.

It’s pretty simple. You should monitor your budget the same way you would with a debit card, to make sure you don’t overdraft. But you have to be even more careful with credit cards because there’s no overdraft protection. And worse, if you don’t make your payment, you’re officially in debt.

Pay your card regularly

In order to keep up with my spending, I pay off my credit card every two weeks. This is also a good way to avoid incurring a late fee or interest, which would cancel out the rewards.

I used to pay off my card on the due date, and that’s definitely an option if you don’t want to worry about making a payment every other week. Paying it more frequently is just an added precaution. Plus, it helps me keep my budget organized.

Don’t spend to your limit

This is pretty self-explanatory. Obviously, you shouldn’t budget according to your credit card limit. If you’re tempted to do this, then you probably shouldn’t be playing the credit-card-rewards game in the first place.

But, for the sake of being thorough, I’ll put it out there: Don’t spend based on your credit card limit. And avoid raising your limit, too.

If you’re planning for a big expense, you might consider making an exception so that you can earn rewards for said expense. But if you think you might equate a raised limit with more spending, just don’t do it.

Pick a good card

When you’re tempted by an enticing offer, do your research. Read the terms and conditions. Read reviews. Here are a few things to consider when choosing a card:

• Is there an annual fee?
• What’s the cash-back incentive? How does it compare with other programs?
• If you’re planning to use the card internationally, are there foreign transaction fees?
• What’s the interest rate?
• Is there a minimum finance charge?

Ideally, the last two shouldn’t matter, but it’s still good to know.

Have an emergency fund first

Because there is a risk of using a credit card, it’s really important to make sure you have an emergency fund first.

Common sense, but worth addressing.

It’s bad enough to over-budget and not have an emergency fund — you have overdraft fees and returned check fees. But when you over budget with a credit card, there’s the added nightmare of interest and late fees.

You shouldn’t play with credit card rewards if…

• You have a shopping problem. A credit card is way too tempting for shopaholics.
• You’re in consumer debt. I wasn’t in massive debt, but I used to have $1,000 worth of credit-card debt. I paid that off before I even started thinking about using my card for expenses.
• You’re living paycheck to paycheck.
• You have bad credit. According to Girls Just Wanna have Funds you should have excellent credit if you’re going to churn cards. “A credit score of 720 or higher on a scale of 850 is considered excellent, and you should have at least a few years of good credit history.”
• You’re considering applying for a mortgage or loan within the next year. “Applying for a credit card will lower your score modestly — about 5 points for each application,” Girls writes. “But if you are about to get a mortgage or other big loan and are borderline on being qualified, they may frown upon opening too many card accounts just prior to applying for the loan.”
• You’re incredibly disorganized and forgetful: There’s the risk of paying your card late and incurring interest. If you’re so forgetful that even reminders sometimes don’t help, I’d probably stay away from credit-card churning.

Rewards are great, but, again, they’re more of a money hack. And having control of your finances is way more important than any hack.

I should also mention that, because lots of people do have trouble managing their finances, many financial counselors advise against playing the credit-card game. Yes, there’s definitely a disconnect because the topic of credit card rewards is hugely popular in the personal finance blogosphere.

With organization and self-control, I think it’s possible to take advantage of credit-card rewards without getting into trouble. If you have a spending problem, however, it’s definitely a bad idea. In that case, you should wait until you get your finances in order and have more control over your situation.

And, anyway, this is just what’s worked for me.

If you earn rewards, what’s your system? And what do you do to prevent any small credit-card disasters?

How to Start Saving For Retirement

Perhaps you heard it from your parents, some guy you know who “really has it together” or maybe you’ve read it on a blog like this one. Regardless of where you got the advice: You know that it’s never too early to start saving for retirement. That means if you have a steady job, you should start to save for retirement

. But how? We get more questions about retirement savings—including 401(k) plans and individual retirement accounts—than any other topic. And no wonder: It seems complicated, it’s boring as hell and, at the end of the day, retirement seems like a long way off when you’re in your twenties.

No matter. You can learn how to start saving for retirement in the five minutes it will take you to read this article, and you can probably start doing it in less than an hour. So if you know that you should start saving for retirement but have no idea where to start, roll up your sleeves, brush off your fear and let’s get started.

Retirement Savings 101

Okay, so why do you even need to save for retirement, anyway? Because lucky for you, thanks to our modern quality of life and medicine, chances are good you will live to a ripe old age. And when you’re approaching 80, you may want to do something other than work. And although Americans receive Social Security benefits after a certain age, our younger generations cannot count on these government benefits alone. They won’t be enough to live on if they’re still around at all. We need to take charge of our own financial future and we do that by saving for retirement. The government will even give us some tax benefits if we do.

Finally, the earlier you start saving for retirement, the better: The more time you let your investments grow, the less money you have to stash away in the first place. (For more about retirement saving basics, read 23 Things Every Beginner Should Know About Retirement Savings).

How to Start

Anybody can start to save for retirement. We’ll cover the two most common ways.

The 401(k) Plan

If you work full-time, ask your human resources manager if your company offers a 401(k) plan or 403(b) plan (if you work at a non-profit). These plans allow you to save for retirement with automatic deductions from your paycheck up to $16,500 a year (in 2010). The best part is you do not have to pay taxes on the money you save. Even better, some employers will match some of your savings (usually a percentage of your salary). When you enrol in your company’s 401(k) plan, you will need to choose among a limited number of investments your plan offers (typically, you are limited to a few choices). Ask to speak with your plan manager for recommendations, or simply choose a target-date mutual fund for the year you will retire. These funds are collections of investments that the plan continually adjusts to maintain appropriate risk and return for your anticipated retirement year.

The Individual Retirement Account (IRA)

If your employer doesn’t offer a 401(k) or 403(b) plan or you want another option, start an IRA. You can open an IRA for free and often with no minimum deposit at most any online broker and can invest however you want (in any stock, bond, mutual fund, ETF, etc.) Investors under the age of 50 can contribute up to $5,000 a year (for 2010) to either a traditional IRA or a Roth IRA. These two types of IRAs often confuse new investors, but choosing can be easier than you think:

• Traditional IRA: Money you put in is tax-free (you can deduct the contributions on this year’s tax return). Choose a traditional IRA if you don’t have a 401(k) or other retirement plans at work.
• Roth IRA: You cannot take a tax deduction for the money you put into a Roth IRA, but you won’t have to pay taxes on the money you withdraw in retirement. Choose a Roth IRA if you do have a 401(k) or other plans at work and you do not earn more than the Roth IRA income limits.

Upon opening an IRA, simply set up automatic investments: transfer money from your checking account to your investment account every month or pay period and forget about it, just like employers do with 401(k) plans. Finally, whichever type of IRA you open, you will need to choose how to invest the money. Choosing from the entire universe of investments is more intimidating than selecting from among a few mutual funds in a 401(k) plan, so proceed carefully. You can research investments yourself using a free tool like Morningstar or enlist the help of a financial advisor (paying an advisor big bucks in your twenties rarely makes sense, but you might pay a fee-only planner for an hour session once a year to help you pick out your starting investments). Whatever you do, resist the urge to do a lot of trading: Even if you get lucky, the commissions and fees will eat up your returns, especially when you’re just starting out.

That’s really all there is to starting to save for retirement. Whether you sit down with your HR person at work or open an IRA account at an online discount broker now, you can probably be saving in less than an hour. The only question is: What are you waiting for?

4 Savings Methods That Really Work

When it comes to saving money, there’s no one-size-fits-all.

We all have different lifestyles, incomes, and preferences. This means the ways we save as well as our abilities to do so, are completely different.

If you have yet to find a savings method that works for you, here are four winning ideas you can try:

1. Save a certain percentage of your income

Saving a percentage of your income is a strategy often used for retirement savings — but it doesn’t have to stop there.

This is a particularly good method for those of you who receive a variable income. Instead of committing to saving $50 per paycheck (and falling short every time your pay dips), you can instead save a certain percentage of your take-home pay.

By doing this, you won’t feel like a failure for not being able to keep up with your intended plan.

Plus, if you’re working on more than one savings goal, you can easily break down your contributions by percentages. For example, you can put 5% towards a down payment, and another 5% towards an emergency fund.

2. Save a set dollar amount

Second, on the list, we have a very popular method of saving a specific dollar amount in a set time period. This method is used frequently because it works and can easily be automated.

Unlike saving a percentage of your income, with which you have to manually calculate your savings, you can save a specific number in a “set it and forget it” type of way.

Saving a set dollar amount each week/month/pay period also works particularly well when you’re running on a short deadline. For example, if you need $6,000 in exactly one year, you know you have to save $500 a month to reach your goal.

3. Save the (virtual) change

Throwing loose change in a jar has always been a common way to save. But now that a lot of money comes electronically, saving your change isn’t as powerful.

To save your virtual change, you’ll need to round up the purchases you make on your debit cards to the next dollar amount, then put the difference in a savings account.

One of the big banks (Bank of America) has started offering this “save the change” feature as one of its perks. Hopefully, more banks get on board with this, as it’s a great way to save if you’re on a tight budget.

4. Participate in a savings challenge

Sometimes, you just need a good ol’ challenge to help you get into the swing of saving. Lucky for you, there are plenty of money-saving challenges for you to try.

Here are a few:

• Saving all of your $1, $5, or $10 bills
• Saving every bill that’s older than you are
• The 52 Week Challenge: Saving $1 for each week of the year (e.g,. $1 for week one, $2 for week two, and so on. In one year, you’ll have accumulated $1,378.)

We all have different preferences when it comes to personal finances. If you haven’t found a money-saving method that works for you, experiment. Keep trying different methods until one click.

What’s your favorite method for saving money? Have you tried any of the ones above? 

Source: 4 Savings Methods That Really Work