Becoming A Better Saver

Save Money By Stepping Down
Saving Practices Made Easy
Track Spending to Reach Your Goals
Truth In Savings: Deposit Wisely

Save Money By Stepping Down

People's Credit Union offers a wide range of products that make it easy to save - you can even set up automatic monthly transfers and manage all your accounts online to track your savings. Visit our Savings page for more details or call or visit your local branch today to open an account.

If you're singing the budget blues, maybe it's time to change your tune.

Instead of eliminating spending altogether to save money, follow what's called the "step-down principle," which offers several options to make a purchase.

Here's how it works. First, imagine a staircase with five or six steps, with the top rung representing the most expensive way to make a purchase, and the bottom rung the least expensive. For clothing, the top rung may be a high-end department store, followed by a discount store, a factory outlet, a consignment store, and finally a garage sale. If you typically purchase children's clothing at high-end department stores, move down a few steps and purchase gently used children's clothing at a consignment store.

Identified by Dr. Alena Johnson, Utah State University, the step-down principle also works with frequency. For example, you may decide to eat out five times a month instead of 10. Or, use the step-down principle to reduce caloric intake. Rather than drink whole milk, step down to 2% or skim.

Find ways to stick to your budget without cutting out the things you enjoy. The step-down principle is a simple strategy that works.

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Saving Practices Made Easy

Pay Yourself First

Use automated transfers to get in the habit of saving. Money will be transferred from your account without you seeing it, which makes you less likely to miss it. Simply complete a form authorizing [name credit union] to receive a portion of every paycheck and deposit it directly into your savings account.

Save 10% of your Paycheck

The general rule of thumb is to save about 10% of each paycheck. If that seems too high, try 5% and work your way up to saving 10% of your earnings. Add 1% every year you get a raise until you reach 10%.

Know Yourself

Examine your goals to determine which savings plan will work best for you. For example, don't invest all your money in an aggressive stock or mutual fund if you're conservative with your money. If you're saving for retirement, select a plan that will fit your financial needs down the road.

Realize that Age Matters

Always take into consideration how much time you have to save for your goal. If you are a recent college graduate, you have several decades to ride out the highs and lows of the market and can take advantage of more high-risk investments. If you're only a few years from retirement, you might not have the time cushion to afford to be too aggressive.

See the Benefit of Compound Interest

The simplest way you can invest your money is to leave it alone and let it "compound" over time. You earn interest not only on what you save, but also on the dividends generated. The earlier and more you save, the more your money will grow.

Use Dollar-Cost Averaging

This is the process of routinely investing a set amount of money over time, rather than all in one lump sum. It's a convenient savings method, particularly for beginning investors. For example, each month transfer $25 or $50 from your share draft account directly into an investment vehicle such as a traditional or Roth IRA. You reduce your overall risk from market fluctuations because your money buys more shares when the price of a share is down, and your money buys fewer shares when the price of a share is up. Bottom line: You've reduced your investment risk.

Use the Rule of 72

To figure out how long it will take for your investment to double with compound interest, use this rule: Divide 72 by the interest rate you expect to receive on an investment. For example, if your investment earns 4% interest, your money will double in 18 years (72 divided by 4 is 18).

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Track Spending to Reach Your Goals

People's Credit Union offers a wide range of products that make it easy to save - you can even set up automatic monthly transfers and manage all your accounts online to track your savings. Visit our Savings page for more details or call or visit your local branch today to open an account.

You can't make progress on your budget goals until you know where your money is going. That means it's time to track spending.

Get A Grip. Recruit the whole family to help keep track of all expenses for at least a week or two--longer if you can manage it. You'll see patterns and how routine mindless spending can mean death by a thousand cuts to your budget.

You may decide to use a small notebook and record each expense. Or you may prefer to use software such as Quicken or Microsoft^® Money. It might work for you to collect all receipts and bills as you pay them. Whatever your choice, try to be consistent and pick a system you think you'll use and not abandon.

If that sounds too taxing, try this: Collect all your receipts for several days, then review each receipt. Put a plus sign or minus sign next to each expense--plus for on-budget, within your goals spending, and minus for off-budget, working against your goals spending. One red flag: being unable to even recall making a purchase.

Get A Goal. You also won't make much progress unless you're monitoring spending for a reason--weighing your expenses against a larger goal or goals.

Give whatever tracking exercise you use a rest for a month and then repeat it. Do you see improvements? Or have the leaks just shifted to other categories? Use credit union tools--direct deposit and automatic deposits into savings--to help you keep your eyes on the prize.

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Truth In Savings: Deposit Wisely

What is the minimum balance required to earn dividends/interest?
Are tiered rates offered? Tiered rates apply to different balance amounts. For example, balances up to $2,500 may earn 3.75%. Balances more than $2,500 may earn 4.25%. If you deposit $5,000, half may draw 4.25% and half may earn 3.75%. Or, in some cases, you may earn the higher rate on the entire balance once you meet the threshold.
When does your money start earning dividends or interest? If an institution pays the day you deposit money into your account, you're earning on your ledger balance. If it waits until a deposited share draft or check clears before it starts paying, you're earning on your collected balance.
How often is the interest compounded? Accounts commonly compound on a quarterly or monthly basis.

As far as fees go, check for these common charges:

Is there a charge if your balance falls below a required minimum?
Is there a fee for closing the savings account soon after it's opened?
Is there a monthly maintenance fee?