Few households were spared from the financial turmoil of the last few years.
Unemployment, investment losses and tough real estate markets have left many families feeling like their budgets are stretched to the limit.
“People will say, ‘I have nothing to save,’” Wintrust Wealth Management portfolio manager Pragna Rohman says. “But they have Gucci shoes, a Prada purse and they’re drinking a latte.”
To get serious about saving, MP Dunleavey, editor-in-chief of personal finance newsletter Daily Worth, says to take a hard look at your spending. “Don’t let your gut be your guide,” she says. “You really want to get granular.”
Dunleavey says you can keep a tally on an envelope, use an Excel spreadsheet or a money management website like Mint.com – as long as you track every penny. Once you know where your money is going, Dunleavey offers these tips get in the habit of saving:
- Start small by stashing away $5 bills.
- Don’t fixate on what you can’t spend. Focus on an inspiring goal like attending your friend’s destination wedding or having a financial cushion when the baby’s born.
- Open a savings account that’s not linked to your checking account, and set up automatic transfers from each paycheck.
- Enlist a “financial buddy” to keep you accountable to goals.
After mastering the basics, try more aggressive tactics. Sure, you can skip your daily latte, but Matt Bell, a Chicago area personal finance writer and speaker, recommends cutting “big ticket” items to really grow your nest egg:
- Choose one category, like entertainment, and go on a “spending fast” for three months. During that time, you’ll find free ways to have fun, and the experiment will “reset your sense of normal,” Bell says.
- Cancel your vacation. You don’t need to go to Disney World to spend quality time with your kids.
- Sell your second car. Bell says many families are surprised to find they can get by with one vehicle – and delighted by the thousands they save annually.
If you’re already saving diligently, the next step is optimizing returns. “Some people are putting money away, but not making any money,” Rohman says. “They are basically parking it in money market funds, which aren’t paying much.”
To make sure your money is working as hard as you are, Merrill Lynch advisor and Northbrook resident Sharon Oberlander prescribes a “financial health day.” Meet with your financial advisor to reassess your risk tolerance and devise an investment strategy to meet long-term goals like paying for college and retiring.
Ante up. What’s your best money-saving tip or trick?
First Vice President, Investments
Wintrust Wealth Management
576 North Lincoln Avenue Winnetka, Illinois 60093
The Oberlander Group – Merrill Lynch
225 W. Wacker Drive, Floor 14
Chicago IL 60606