So you’re doing better than most Americans by trying to save your money. However, are you making mistakes that are limiting your savings potential? Here’s a list of 6 common savings mistakes and quick tips on how you can avoid them.
- Not getting the best rate. Shop around for the best rate. You don’t need to be stuck with your puny 1% savings account. There are several online banks that offer awesome savings rates. ING Direct offers a 4.50% APY. (If you ask me for a code you can also get a $25 sign up bonus. Free money!) HSBC Direct has 6.00% introductory APY until April 30, 2007. After that it’s 5.05%.
- Not being consistent. Saving is a lifelong commitment. Many people make a priority one month and then forget about it the next. Don’t be that person. Set up an automatic deposit with your new online account and forget about it.
- Not setting concrete goals. You need to have concrete goals. Vague goals are no good. “I want more money” is not a concrete goal. How much more money do you want? $.25? $5.00? $1 Million? And when do you want it by? Tomorrow? In 50 years? A better goal would be “I want to save $4,000 by June 1, 2007.” Much more concrete. When you have concrete goals, you’re more likely to accomplish them or at least come closer to accomplishing them than if you had vague goals.
- Saving 10% post-tax rather than pre-tax. We all know we should be saving at least 10% of our income. But are you doing it pre or post-tax. If you’re doing it post-tax, you’re not really saving 10% of your income.
- Procrastinating. Start saving now. Leave the excuses at the door. It doesn’t matter how much you’re making. Make it a priority to save a part of your income. The power of compounding interest will take your small contribution and grow it into a small fortune. The key is to start saving early.
- Spending too much. If you have a goal to save $200, but you’re coming up short, it means you need to cut back on your spending. Find small things cut back on. Stop buying the expensive coffee everyday. Avoid ATM fees. Take the money you save and put it in your savings account.