5 Tips To Help You Save Money And Start Investing

Many Americans faced with the opportunity to invest, have not yet started because of uncertainty with how to get started or because they don’t think they have enough money saved. For those looking to start saving money to invest, the following are five helpful tips:

Tip #1 Eliminate Credit Card Debt

Killing your credit card debt is one of the first steps you should take in order to start saving money. The best approach when doing this is to pay off credit cards with the highest interest rates first. You should also make an attempt to pay more than the minimum balance due on your debt so that you can pay it off faster. Getting rid of credit card debt will increase your credit score, opening up better lending options if you ever need to take out a bigger loan in the future. This could include a loan for buying a house or even starting a business. Once you are free of credit card debt, you can move on to paying off any other debt you may have such as auto and student loans.

Tip #2 Automatic Savings Deposits

One of the most beneficial things you can do when you open up a checking account is to also open up a savings account. Once you have one open, you can choose to automatically deposit a certain amount of money to your savings account each month. This is essential if you want to be prepared for emergencies, like the unfortunate event of getting laid off work or a sudden medical emergency. It is recommended that you have at least six months of income set aside in your savings account at all times, that way if you are laid off work you can support yourself until you can find another job. If you use direct deposit at work for your paycheck, you should also set up the deposit so that a percentage of your income goes directly into your savings account.

Tip #3 Using 401(k) Contributions

A lot of companies offer a 401(K) plan to their employees, allowing them to automatically deduct a part of their paycheck to deposit into an account where the money is saved for retirement. Every company’s 401(K) plan may be a little different, but some companies offer a 401(K) matching plan. With a 401(K) matching plan, employers will match a percent of your own contribution to your 401(K) account and since this is basically like receiving free money to save towards retirement, make sure you are taking advantage of this offer. Unfortunately, 401(K) plans have annual limits so you cannot contribute more than a certain amount to your account, but you can always open an Roth IRA account and continue saving there. Currently for the year 2013 the maximum annual contribution you can make to your 401(K) account is $17,500.

Tip #4 Opening a Money Market Account or CD

Invest your money in a Certificate of Deposit (CD) or money market account as one of the safest ways to get some decent returns on your money. While CD’s offer a safe return, the return usually is not very high and often requires you to invest at least $50,000 to get any worthwhile returns. Money market accounts on the other hand, yield higher interest rates but have a higher minimum balance requirements in addition to restrictions on the amount of times you can withdraw your money in a given year.

Tip #5 Starting a Budget

Starting a monthly budget is another great way to start saving money. Many people miss their budgets by overspending and after missing the mark so many times, give up on following a structured plan. However, if you stick with it and really cut out the unnecessary expenses you could end up being surprised by how much you could be capable of saving each year. Small things such as cooking at home more often instead of spending surplus amounts of money on dining out not only serve a health benefit, but can also repair the holes in your pocket. Find a good budgeting plan that works for you and cut back on anything that is not a necessity. You can start with an excel sheet that lists your monthly expenses and subtract the costs from your income. If you spend more money than you make, you may want to consider starting a budget—and following it closely!

Thinking About Investing

Once you have enough money saved up so that you can start investing, you should keep in mind that you won’t be able to use your checking or saving account and will instead need to open a brokerage account to make your trades. Don’t be alarmed by the fact that some accounts will require that you put down a minimum balance of $10,000 into your account – you can certainly still start find an account with $0 minimum balance. You just need to make sure that you do your research and find an online brokerage account that fits your needs.

About the author

Kimberly J. Howard, CFP®, CRPC®, ADPA®
Kimberly J. Howard, CFP®, CRPC®, ADPA®

Kimberly J. Howard, CFP®, CRPC®, ADPA® is the founder and owner of KJH Financial Services in Newton MA and Denver CO. She enjoys helping clients explore and achieve their life goals through effective comprehensive financial planning.

Kimberly holds a Master of Science degree in Computer Science Information Management from Boston University. She earned a Bachelor of Science degree in Mathematics and Physical Education from Stephen F. Austin University in Texas. She attended Boston University for her Certification in Financial Planning and H&R Block for Tax Preparation Certification.

Kimberly is currently an adjunct faculty member at MetroState University where she teaches General Financial Planning Principles, Income Tax, Retirement Planning and Estate Planning. She is a past adjunct faculty member at Boston University and The College for Financial Planning.

Kimberly is a member of the Financial Planning Association (FPA) and The National Association of Personal Financial Advisors (NAPFA). She was named to the Metropolitan Who's Who Among Executive and Professional Women. She is an expert Advisor for Nerdwallet, BrightScope, Morningstar, and FiGuide.

Kimberly promotes a life planning approach with a balanced work/life style. She is active in sports including cycling, golf, skiing, and hiking.

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