Do you dream of buying that first home, a cottage on a lake, sending your kids to college – or all of these? Unless you have a rich relative who will leave you lots of money, the only way to achieve your financial goals in life is to set aside savings on a regular basis. As unexciting as this sounds, successful savers live by a simple rule: pay yourself first.

What this means is that savings is not what you may or may not have at the end of the month after you pay all your bills. Putting money into savings should be the first expense you consider. Think of it as another bill and pay yourself first. Taxes, social security, health insurance and a host of other deductions come out of your take-home pay before you receive the net amount. Think of money into your savings as one of those automatic deductions. In fact if your employer offers the option for direct deposit, see if you can have a portion of your check transferred into savings. You can’t spend what you don’t have and you may never miss it.

But I never have enough to save now? How will this work? If you are not yet in the habit of saving, start small. Small amounts can add up faster than you may realize. You can save $20 a week can’t you? It may mean a few less $4 cups of coffee, $2 bottles of sport water or fast food, but most anyone can find $20 each week. That adds up to $1,040 per year. Do that for 10 years in a low interest earning savings account and you will have just over $12,000. Not bad.

Here is a second rule for successful saving: The miracle of compound interest is time. The earlier you start, the less you need to set aside to get to the same result. So if you double your savings – $40 per week you will get to the same amount in about 5 years. Consider what happens if you put the money in a higher-yield money market fund. Your annual contribution of $2,080 at 4.48% for 10 years will yield $26,679. Maybe it is worth a few less cups of coffee.

This simple rule of paying yourself first should make contributing something to a 401(k) or similar retirement plan an easy decision to make. If your employer matches your contributions, contribute at least to the limit to obtain the match. If not you are leaving money on the table. Many Americans do not save for retirement, thinking that other expenses are more important. Look back to the second rule. Time is on your side. If you start saving in your 20’s, you can set aside a smaller amount to reach the same goal, as someone who does not get started until years later. And since the contribution comes out before taxes and before you can get your hands on it, you will never miss it.

Separate Your Savings
If you are new to saving, try saving your money according to what you want to do with it. Having real goals in mind will make the choice to forgo some spending and set aside money for your future that much easier.

The Unexpected – Have an emergency fund.
Financial advisors tell us to save 6 months salary and keep it in reserve. This may sound impossible to achieve but this money can be critical if the worst happens – you lose your job or a health crisis racks up huge bills. Yet this money can cover the smaller crises of life – you can get new brakes on your car or replace a stolen cell phone or bicycle – without having to use a credit card. You spend a bit and then replenish the account. Credit card debt is how most of us see our monthly expenses creep up, making sticking to a savings program even harder.

Once you have the emergency fund in place, then you can separate your savings according to your goals. Saving money is much easier when you have a reason to set it aside.

Short Term Savings
Short-term purchases are the type of things you know you will want to do in the near future. If you save up for the purchase there will be no need to rack up a credit card bill. Short-term needs can include saving for holiday gifts, tuition, weekend getaways or hitting the sales for new work clothes.

Long Term Saving Goals
Big-ticket items require more time to save. It takes planning to save enough for a down payment on that first house or that vacation cabin. Other examples are planning ahead to replace a car or saving to remodel a bathroom.

And one final rule: Get a raise in salary? Give yourself a true raise. Put the extra money in savings before you get used to having the increase and spending it. Again, you won’t miss it.

Still think you can’t save? Read about keeping a money diary and get started.

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