7 saving tips for young adults

Mon, Jan 31, 2011

Budgeting, Financial Advice

As a group, young adults are yet to have completely made up their minds on the issue of saving, though in America at least, just over half of them claim to be saving for specific things.

But for the rest of us, regular saving may seem a daunting prospect. How many of us are pulling in enough to really feel like any of it is “extra”? I’m here to tell this group, specifically, that saving doesn’t have to be as tough as you feel it is, and that the sooner you start saving (right now is good!) the sooner even a meagre savings regime can lead to a healthy nest egg.

For example, if you’re 23 and put away $100 a month in an account yielding 0.9%, you’ll have $16,875 by the time you’re 40, (assuming 25% federal tax, 6.8% state tax and 3% inflation). But if you hold off until you’re 30 to begin, you’ll have only $10,721 at 40, assuming the same variables.

So whether you’ve just started saving or you’re already a saver looking for a little extra help, here are some ideas:

1. Avoid purchasing on impulse. When you feel the need to shop, try taking a deep breath before plunking down the plastic. An opener strategy can be to buy as much stuff as you can online, so as to avoid the pressure of salespeople. Fill up your shopping cart with all the stuff you want, but don’t actually pay for anything for at least 24 hours. When you return to the cart, go over the stuff in your cart again critically. You’ll often find you’ll have changed your mind about some things, or even that you don’t want what’s in there any more at all.

2. Overestimate how much you’ll spend. Let’s keep it real: when you don’t have decades of experience to help you figure out what living costs it’s easy to make expensive mistakes and miscalculations. So inflate your costs where you don’t have total certainty and you’ll often find yourself with an extra chunk of change at the end of the month.

In my personal budgeting spreadsheet I have a column labelled “expected spending,” in which I always put a higher-than-expected figure, and another next to it that tracks actual expenditure. At the end of the month whatever the difference is I transfer into a savings account.

3. Do your entertaining at home. This doesn’t have to cost you your social life! Some of my own greatest memories involve getting together with friends and sharing cheap meals while watching horrifically bad movies together.

Today, dinner at home can continue to mean a good time for not-much money. My girlfriend and I share the cost of “Sunday-night roasts” with a group of friends by preparing the meals potlock-style and taking turns amongst the group hosting and cooking the main course. We always have a great time.

4. Spend less on date night. When I first met my girlfriend, we’d routinely spend over $200 on dinner dates (which no wonder we’re scrambling to save money now). Though for all that money I can’t remember what we ate or chatted about at them. But I’ll never forget the score the first time we went bowling or talking afterwards about our glory days playing in bowling leagues at our respective high schools. We had fun sharing an interest, learned some fun stuff about each other, and grew emotionally closer together, for a total cost of maybe $20.

In fact, thinking back on it our best dates have always been cheap or free: playing catch, watching DVDs, playing boardgames, going for long romantic walks. If we’d stuck to those kinds of dates and skipped eating out, I’m sure we’d be just as in love today — and hundred of dollars richer.

5. Put small bills aside. Remove the low-denomination bills from your wallet and stash them. You’ll find you can quickly build up a large sum of bills and barely notice it.

6. Automate your savings. Get your bank to handle transfers from your checking to your savings account for you. Many banks even offer rewards for such automatic moves. You could also arrange with your employer to have a chunk of your earnings deposited directly into a savings account. Not ever seeing the money makes it far less likely that you’ll spend it.

7. Only spend cash. A friend of mine suggested his money-saving strategy: every Sunday he goes to the ATM and withdraws the entire amount he’s budgeted for the week. Then he divides the cash up into envelopes, and labels each one with a different purpose, such as “eating at work.” If he uses up all her lunch money at the beginning of the week, he then has to take his own home-made lunches into work until the following Monday. Any cash left in the envelopes at the end of the week goes into savings.

You’ll find, as he does, that using cash will make you think harder before letting it go. Plastic is impersonal — you can swipe away money without even noticing/feeling it. But when you physically hand over dollars and cents, you’re more likely to feel the pain of your spending. And counting up the cash you saved at the end of the week can be very satisfying.

So there are my suggestions. If you have some strategies of your own, or anything else you’d like to share, don’t hesitate to leave a comment below.

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2 Responses to “7 saving tips for young adults”

  1. Mama Kelly aka Jia Says:

    Skipping eating out (or even take out) is the easiest way I’ve found to slash our food costs. Plus, it can be a whole lot of fun to try your hand at making the dishes you miss.
    Mama Kelly aka Jia´s last blog post ..Frugal Pantry – 11 Cheap Pasta Based Meals

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  2. Janice Says:

    Cut down on the amount of bills. I put all my things on one card so I only have to pay one bill at the end of the month. I no longer have a cell phone bill so every call I make or receive goes directly to my cell phone. Which means, one less bill! It’s great because with my TracFone, I am paying only $45 for unlimited talk, text, data, etc. on the AT&T network. Couldn’t get any better than this

    Reply

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