Develop a Savings Plan

Increasing your savings inevitably entails the awful task of reducing your expenses. But cutting expenses is never as difficult as one thinks. Taking just a cursory look at where your money goes will probably reveal several items that could be eliminated or reduced. So the task at hand is to find a few simple and painless ways to cut back.

To get you thinking about unearthing ways to save a few bucks on your day-to-day spending, here are some ideas that are small potatoes, but put enough of them together over enough time and you'll accumulate some serious money.

• Take muffin and coffee to work rather than buy en route
• Bring lunch to work rather than go to a restaurant or deli
• Reduce lottery ticket purchases
• Patronize less expensive restaurants
• Take public transit to work or car pool
• Buy generic items at the drug store and supermarket rather than brand names

If you start to monitor where you spend your daily money, you're almost certain to come up with some ideas that can amount to $75 a week. That may sound like small change, but those savings will add up to big bucks over the years. For example, if the $75 savings is added to an investment account, ideally into a retirement plan at work or an IRA, here's how much that amounts to over the years at an annual investment return of seven percent:

  • 5 Years $ 23,000
  • 10 Years $ 56,000
  • 20 Years $170,000
  • 30 Years $400,000
  • 40 Years $860,000

Of course, once you get into the savings habit, like any addiction, you'll want to do more. So if it's $75 a week this year, why not $100 next year after you find some more ways to cut costs or the next time you get a raise?