lotsa-cash“Save money? Are you kidding! I have no spare money to put away.” How many times have you said or heard that complaint? Well, today’s your lucky day! Here’s a way to save money…money that you don’t yet have.

Most experts agree that having a budget or spending plan provides the basis for financial success. And a key ingredient in that plan is savings. Conversely, most real people think most experts live in an alternative reality where money magically appears. But all kidding aside I have had a lot of success building my savings with money I didn’t yet have. Here’s how:

1. Open a bank or investment savings account with the least amount of money they’ll allow. For a bank or credit union that might be as little as $5. For a cash management account at an investment firm, like Fidelity, there may be no minimum at all. Let’s call this your Magic Money Account.

2. Have your employer’s payroll department arrange to send a fixed dollar amount sufficient to cover your current household expenses and fun money to your existing checking account. I’ll call this account your Household Account. An added plus is that you can use an online bill payment feature to eliminate the possibility of late charges for checks held up in the mail and even save on postage! Keep funding your 401K as you always do with a fixed dollar amount as well, but direct that a small sum ($1 to $5) be added to the new savings account you set up in step 1.

3. Instruct payroll that any money left over after funding your Household Account and making your 401K contribution (and any other deductions you may have) be sent to the new Magic Money Account you set up in step one. Now sit back and watch the magic of invisible money start to accumulate!

The next time you get a raise or bonus, instruct the payroll people to put half of your new increase into your Household Account. The remainder will automatically flow into your Magic Savings Account. Since this is money you haven’t been relying on, there will be no hit to your spending. In fact you’ll still be getting a raise from the half of your increase that goes into your Household Account. The magic is that your savings will grow with money you didn’t have before, never counted on and won’t be missed. If you’re a procrastinator, like me, you may not get around to redirecting your raise for a while, resulting in even more going to savings.

Using direct deposit to put money away from every paycheck makes saving painless no matter where you stash your cash. Starting small is fine. Even if it’s only $5 a paycheck, you’ll be surprised how your stress level will drop by having started a savings ritual not to mention having some cash available for an emergency or unexpected opportunity. Your confidence and financial health will grow as you see savings where there were none before. Soon you’ll have enough saved to handle a small financial emergency or opportunity. It can be hard to distinguish between and emergency and an opportunity. How can you tell an emergency from an opportunity? Simply put, if you can eat it, drink it or wear it, it’s not an emergency!

For my readers who don’t want anything as formal as additional savings accounts but still want to save for a goal like a vacation or your next unforeseen emergency, here are some other tried and true suggestions:

4. Make savings part of your spending plan. Most people don’t budget for savings and that can be a mistake. Emergencies happen, usually at the worst possible time when you are least prepared. Having a cushion of any amount will make a world of difference the next time a tire blows out or Fluffy needs to see the vet unexpectedly.

5. Estimate what you’ll need to save in a year and divide by 12. That’s the monthly amount you need to include in your spending plan. If you don’t have that much to allocate to savings, you can either spend less in another area or increase your income with some part time earnings, or you can rearrange your goals.

6. Consider a grown-up version of a piggy bank. No, you don’t need a huge adult-sized porcine pocketbook. A technique that helps me make the most of my spare pennies is to roll change. Not pretending that I’m someone else, but to place my leftover change in those cute little tubes you get (for free) at the bank.

For guys, this is as easy as picking up the change that falls out of your trousers when you hang them up. Ladies will not only save money but also save the cost of physical therapy from damage caused by purses weighted down with pounds of coins. Expect this exercise to yield about $200 a year per person.

7. Another way to find money to save is to use your credit cards less. Paying with cash helps reinforce the link between spending, earning and the cost of what you’re shelling out cash for. Plus when your roll is nearly gone, you may find yourself thinking twice about your next purchase.

8. You can give yourself a raise by bagging your lunch. Going out for lunch every day literally costs you thousands. Do the math. With 260 business days in a year a $10 lunch special becomes $15 by the time you add tax, tip and gas to get there and back. That’s $3,900 a year. If you pay 25% federal income tax, 7% state income tax and 7% social security tax, you need to earn $6,400 to take home $3,900. The same math works for other meals too!

9. Make some adjustments in how you pay your taxes. To my readers who need a dash of fear to help them along I offer the following: over withholding on your taxes has always been a big negative in the eyes of many. Yet the downside of giving the IRS an interest free loan of your money may not be so bad today. Given the next-to-nothing interest rates available at your bank, very little is being given up to add to your IRS withholding rate.

The positive result is forced savings and the comfort of knowing that not only will you not owe the Feds, but that you are virtually assured of a fat refund in April. Just in time for vacation planning or to kick start your emergency savings!

10. My last tip is to buy a Sunday newspaper. I know this is so twentieth century and newspapers are dying, so not only will you be saving jobs, but you’ll get some valuable coupons in the process. Alternatively, you can check out on line coupons at places like www.coupons.com or www.retailmenot.com where you can put in a few minutes and come up with $20 in savings every week. That’s the equivalent of a $1,445 raise.

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