Articles

Print

How to Save Money When You're in Debt

Written by Marty Orgel

If your savings cupboard is bare, we've got tips on how to add cash to your larder.how to save when you're in debt

While many of our readers are concerned about choosing the best vehicle for their retirement fund, others are concerned about how they can put money aside when they barely have enough to live on.

One of our readers wrote to say she was in the military, based in Fort Dix, N.J., and could barely afford everyday expenses. So, she asked, "How can I save money if I'm already spending everything I earn just trying to stay alive?"

The answer is: Pay yourself first. A long-held truth of personal finance is that you need money to make money. And the only way you can accumulate wealth is to take some of your pay and give it to yourself.

If you have to, write yourself a check when you're paying bills. Take some drastic measures, like making your own lunch every day and putting those savings into a piggy bank. Instead of buying a gourmet cup of coffee at work, make a pot at home and carry a thermos. Clip those coupons.

Rent a video instead of going out for a movie and pay yourself the difference. Sure you're skimping, but you're also saving! Remember, this is for your future.

The chart with this story shows you how much $10 a month will grow over a period of time at a modest interest rate. And you can get the lower rates at any bank or credit union for a basic checking account.

How Much Will My Savings be Worth?

Years

0%

1%

2%

3%

4%

5%

6%

7%

10

1200

1261

1327

1397

1472

1553

1639

1731

15

1800

1941

2097

2270

2461

2673

2908

3170

20

2400

2656

2948

3283

3668

4110

4620

5209

25

3000

3407

3888

4460

5141

5955

6930

8101

Once you accumulate $500 to $1,000, put it into a higher-yield, money-market account. If you get a bonus at work, or cash as a gift, plow it into your account.

Once you've saved $1,000 or more, you can start thinking about other investments, such as an IRA.

You should also work toward putting away a nest egg that will hold you through three to six months of hard times. Enough to pay your rent or mortgage for a couple of months, pay a doctor for an uncovered expense, or other emergencies.

It won't be easy, but the financial freedom you will gain will be worth the hardship now.

Web links:
National Assoc. of Personal Advisors
smartmoney
morningstar