When it comes to saving money, forced discipline and sometimes trickery can work nicely

Everyone needs to save, but sometimes it becomes difficult.  It’s easy to spend everything you make, especially in times where the cost of living is a little more than it was last year and your salary was frozen as a company money-saving initiative.

Sometimes you can “trick” yourself into saving a little here and there if you feel a little apprehensive about saving in a big chunk.  Look for the small ways to save a little and reap the rewards at the end of the week, the month, the year, and beyond.

Here are some quick, easy and fun ways to save some money.

1.   Create a budget.

This will be the most difficult, but can also yield the biggest reward.  Any number of resources can be found on the Internet for creating a budget just by doing a search.  You can purchase any number of budget software, and some programs have options to help you create a budget built-in.  The important thing is to be honest with what you spend.  Keep track of your spending habits for three months to come up and average of what you spend and what you take in each month.  Some people will use the “envelope method” and put the money for each category in envelopes.  When the money’s gone at the end of the month, that’s it.  Just make sure you stick to the budget.  Most people will find that frivolous spending diminishes when they think about how much they actually spend.

2.   Forced discipline works.

Many people take advantage of direct deposit.  If this is available, use it to save.  Set up a savings account with your bank or credit union and put 5% of your take home pay in the account.  This is an amount most people can live with and will not miss.  It is vital that you “pay yourself first” when budgeting, so make sure to save every month.  Even if it’s only $20 a week, at the end of the year, your account will have over $1,000.

3.   Use pre-tax contributions as a way to save.

Whether you use it for medical expenses, insurance, cafeteria plans, or retirement contributions, every dollar you save is significant.

4.   Utilize employer contributions to your retirement plan.

First, make certain that you’re putting away money for retirement.  If you’re not, you’re missing out on a big savings opportunity.  If your employer will match retirement funds up to a certain percentage of your gross income, take advantage of it.  An average employer contribution is half up to 6%.  Check with you payroll or human resources department to see what programs are available.  It’s free money!

5.   Refinance your house.

One by-product of a down economy is lower interest rates.  If you’re planning to stay in your home for a number of years, you could see significant savings every month simply by refinancing your home.  As an example, at 7% interest, our payment was $989 a month.  Dropping the interest rate to 5% saved us $157 a month in interest.  Our payment is now $832 a month.  That’s $1884 a year and more than $56,520 over the life of a 30-year loan.

6.   Brown-bag it.

Take your lunch twice a week.  That’s not too much to ask of yourself.  Bring leftovers from dinner the previous night.  For argument’s sake, let’s say the average lunch costs $8.  That’s a savings of $16 a week.  Doesn’t really seem like much, but remember, we’re going for long-term here.  It’s $832 a year… one extra mortgage payment.

7.   Speaking of extra mortgage payment…

Did you know that if you pay one extra mortgage payment a year, it will deduct eight years of payments from your repayment schedule?  This is the most complicated math we can do for the sake of this article.  If you reduce your payment schedule by eight years, at $832 a month that’s a savings of $79,872.  Don’t forget to subtract the additional money that you’re paying.  The savings over the life of the mortgage will be $61,568.  (Quick…add that to the savings of refinancing.  That’s over $118,000 savings in 30 years.  Think about that in relation to how much you paid for your house.)

8.   Use a passive saving technique.

The best example of this is saving change in a jar.  A lot of people do it.  It’s amazing how much a jar full of change is worth.  Try kicking it up a notch.  Look at your dollar bills.  There are 12 (A through L) and it denotes the regional Federal Reserve Bank that issued the bill.  Pick one of the letters and save every dollar bill you come across.  You won’t miss a dollar here and there, will you?  At the end of the month, put it in savings.  We have the kids do this.  We hope it will teach them the value of saving, a little about our money system, and maybe even some geography.  We pick a different letter each month and put the bills in the college funds.  One person we know does it with $5 bills by saving every bill he finds with the smaller Abraham Lincoln on it.  He averages about $80 a month.

Remember, every little bit helps.  Stick to it.  Make it fun.  Saving is addictive.  When you realize how much you can save by just taking small steps, you’ll find ways to save more without really feeling it.