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Saving
Saving is the Best Way to Love Your Money
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#1 Pay Yourself First
You're probably inclined to pay everyone else first. You may even still be supporting children or other dependents. But it's vital to
start paying yourself first by saving money. It's the only way to ensure your financial longevity and well being.
Most banks can automatically transfer funds from your checking account to your savings account, money market, mutual fund and other accounts.
Automatic deposit makes the payment a habit you can maintain.
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#2 Save Tax Free
Join your employer's 401(k) or other retirement plan immediately and max out the amount you can contribute. Also make sure you're setting aside
enough to be eligible for any matching funds — extra money for your retirement fund — given by many employers.
Saving is so crucial, the government even encourages it if you're a low-income worker. If you qualify, you can get a federal tax credit and
receive as much as $2,000, depending on your income and how much you put into retirement programs. For more information, read IRS Publication 590,
Chapter 5, at www.irs.gov.
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#3 Know the Truth (in Savings)
Make sure you know the details about your bank's savings account plans. The Truth in Savings Act requires financial institutions to disclose
the following information on offerings:
APY is how much a deposit will earn over the course of a year. The "yield" accounts for compounding interest based on interest rates, as well
as the frequency of compounding.
For more on the Truth in Savings Act, visit www.fdic.gov.
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#4 Consider the Future of $80
If you have a credit card balance of $3,000 (with an annual interest rate of 18%), and make monthly payments of $120, it would take you more
than 2.5 years to pay off your bill. This includes $788 of added interest within that period.
Now, here's a great idea to save you money. If you pay an additional $80 per month on that debt, for a total payment of $200 a month, you would
pay off the debt an entire year earlier and save over $350 in interest payments. That's a great return for just $80 a month.
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#5 Delay Before You Pay
This doesn't mean pay bills late. It means stop yourself before you buy. Online shopping has taken impulse buying to new levels. Give yourself
a timeframe before you decide to commit to a purchase. Think over that new pair of shoes for two weeks. If after two weeks, you still can't live
without them, make room in your budget before you buy.
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#6 Sock it Away Somewhere
Once you decide to start saving, you need to determine where you're going to put the money. And remember, "under the mattress"
doesn't count.
Several common savings options include:
Some of the most important considerations in choosing a savings vehicle include:
Access. How quickly can you access your money?
Safety. How safe is your money? Is it federally insured?
Interest. How much money will you earn? What are the interest rates and terms?
Limitations. Are there minimum balances required? Are there limited checks that can be written per month or penalties for early withdrawals?
For more on savings options visit www.aarp.org/money.
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#7 Start Now
Even if you can only put aside a small amount at first, the sooner you start, the faster your savings will accumulate. For every five years you
delay, you may need to double your monthly savings amount to achieve the same income at retirement. Try setting aside $25 a week and, if you
don't miss the money, add another $5 each week.
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