12 Smart Savings Tips



If you are looking for a Mortgage Advisor to help you through the financing process, please give us a call at (520) 744-2292 or email Sue at sue@pcMortgageAdvisor.com.

Sue Pullen
Licensed Mortgage Professional #206048
Fairway Independent Mortgage Corp.
5401 N. Oracle Rd., #101
Tucson, AZ  85704
BK #0904162


12 Smart Savings Tips Sue Pullen See Tucson Real Estate

Contrary to recent years, many Americans are now focusing on saving rather than spending.  If you’d like to create a cushion in your wallet and maybe save up for a gorgeous house in Tucson, here are 12 ways to start!


#1 Put saving on autopilot
Only 24% of Americans have a sufficient emergency savings cushion, and another 24% have no emergency savings at all -- so the majority of people need to heed this tip. The biggest barrier to saving is not being in the habit of saving, so the best way to get in the habit is to pay yourself first.
Have money directly deposited from your paycheck or even your checking account into a dedicated savings account.

This can be done alongside your other goals, such as paying down debt or saving for retirement, but not instead of those goals. You won't miss what you don't see. And putting your savings on autopilot is a great way to reinforce the savings habit when unplanned expenses inevitably come along and eat up what you've saved. You're only one paycheck away from beginning to replenish your savings balance.


#2 Get a high-yield savings account
When it comes to savings accounts, "high yield" seems like a gross exaggeration when the top-yielding accounts barely pay 1 percent interest.

There are three requirements you should have when you create your rainy-day fund. It must be liquid, meaning you can get to the money whenever you need it. It must be without investment risk, and you must earn a return that protects your buying power against the diminishing effect of inflation.

The top-yielding savings accounts insured by the Federal Deposit Insurance Corp. and money market accounts meet the first two of those requirements. And while returns currently follow the rate of inflation, they are the first to eclipse inflation should the pace of price increases fall or interest rates eventually pick up.

Best of all, these accounts can be found with little or nothing in the way of a minimum deposit and are available to consumers anywhere in the United States. Call Tony Ray (520-829-1234) for some great referrals to find the highest-yielding, FDIC-insured savings accounts available nationwide.


#3 Find a free checking account
Having a fee-based checking account can take hundreds of hard-earned dollars out of your pocket every year. According a survey from Bankrate.com, the average interest-bearing checking account charges a monthly service fee of $14.15 and requires maintaining a balance of nearly $5,600 at a near-zero rate of interest to avoid fees. Instead, look for an account that charges no monthly service fees or per-transaction fees and doesn't require a minimum balance.

Free checking accounts DO exist: 45 percent of large banks and thrifts in markets around the country and 76 percent of the nation's largest credit unions still offer a noninterest, free checking account. So keep looking!

Even if your bank has gotten rid of free checking accounts, that doesn't necessarily mean you're stuck paying the fee. Many banks and credit unions will waive the fee for customers with multiple accounts or even for something as simple as signing up for direct deposit.

12 Smart Savings Tips Sue Pullen See Tucson Real Estate

#4 Keep track of your monthly spending
Fewer than 6 in 10 Americans, just 58 percent, track their spending against a monthly budget. Whether you call it a budget or a spending plan, gaining control of your spending accomplishes two things: it helps you figure out where you can cut back, and it helps maximize your savings efforts.

Start by tracking your spending for a two-month period. Then take this information and build a realistic monthly budget. Each month, track all of your expenses -- everything from the $1 tip to the newspaper boy to the monthly mortgage payment. At the end of the month, tally up your spending against the budget and see where you did well and where you fell off the wagon. If you spent less than planned, move the remainder into your high-yield savings account or use it to pay off debt.


12 Smart Savings Tips Sue Pullen See Tucson Real Estate

#5 Pay down high-interest credit card debt
For many households, the best return on their money is to pay down credit card debt. Whether carrying balances at 12 percent or 22 percent, credit card debt is typically the most costly debt people have.

Using excess cash into repayment of credit card debt is a double-digit, risk-free return because it reduces the remaining balance and therefore, interest charges. This is also a sound move now while credit card rates remain low. Consumers with high credit scores can find interest rates in the single-digits as well as zero percent, balance-transfer offers lasting one year or more.

When prioritizing your debt repayment, start with the highest interest rate card first and focus on paying off the other balances in descending order.


#6 Start saving for retirement
The pressure of supporting ourselves through retirement is increasingly weighing us down. The first introduction to retirement savings often comes from a workplace retirement plan such as a 401(k).

Adding to your 401(k) not only reduces your taxable income now, but your investment goes to work immediately and grows without the deduction of taxes until you begin withdrawals in retirement. The regular deposits made with each paycheck represent the best example of dollar-cost averaging, or purchasing fewer shares when values are high but more shares when prices are low. Any employer contribution is like free money, so make sure to put in at least enough to maximize any employer match.

If your place of business offers a Roth 401(k), your deposits are made with after-tax dollars, but withdrawals during retirement will not be penalized by taxes, therefore letting you keep your entire nest egg.


#7 Make an IRA contribution
If you or your spouse has earned income, then you are eligible to contribute to an individual retirement account, or IRA. In 2012, those younger than age 50 can contribute a maximum of $5,000, assuming you made at least that much. If you are 50 or older you can contribute up to $6,000 thanks to the permissible catch-up contributions.

You can open an IRA with a bank, credit union, brokerage firm or mutual fund, and invest the funds however you like. An IRA is a great way to add to the asset allocation of your workplace retirement plan, where you might be limited to an available selection of investments.

With an IRA, you can select investments that are not available in your workplace retirement plan, like commodities, individual stocks or certificates of deposit, or CDs, giving you access to investment options that result in a more diversified portfolio.

A typical IRA offers tax-deferred savings, whereas a Roth IRA offers tax-free savings for retirement. However, Roth IRA contributions are limited based on total income.


#8 Rebalance your investments
Bonds have had a positive year, cash yields are still close to zero, and there has been lots of volatility in the stock market. Many international markets are taking it on the chin while the U.S. market has been staying afloat.

Given this diversity in returns, your portfolio might look different than it did at the beginning of the year and may have drifted from your intended investment mix. So rebalancing your investments back in line with your original goals and risk tolerance is a smart step.

Rebalancing also enforces the habit of buying low and selling high, as you'll be reallocating some money out of the assets that have performed well and into those that have lagged on a relative basis. This also helps lessen the vulnerability of your portfolio to a strong change in the markets.

Rebalancing is a good habit to perform each year, but it is especially important in a year of volatile movements and disparate returns between asset classes.

12 Smart Savings Tips Sue Pullen See Tucson Real Estate

#9 Sign up for a flexible spending account
Almost everyone spends money on medicine, prescriptions and copayments. Maybe you also have dependent-care expenses while you're working or pay to commute to work. If your place of business offers a flexible spending account as part of your benefits, think about signing up.

A flexible spending account, or FSA, lets you to pay for medical, dependent-care or transportation costs with pretax dollars set aside with every paycheck. By paying with pretax dollars instead of after-tax dollars, you're effectively getting a discount on all these expenses you regularly incur. How big of a discount? Well that depends on your marginal tax bracket. Those in the 15 percent bracket are saving 15 percent by paying with pretax money instead of money that already has been taxed. Contact your employee benefits department to get specific information on setting up an FSAs.


#10 Think about a rewards credit card

Do you always pay your credit card balance in full? If so, you're the perfect candidate for a rewards credit card. With a rewards credit card, you are compensated in the form of cash back, airline miles or one of many other methods for the everyday purchases you make.

Figure out which type of reward is most appealing to you, and compare card offers based on what percentage of your purchases are paid out in rewards. A 1% reward ratio is the most common, but many cards have higher payouts for certain categories of spending (like gas or groceries) or above a certain spending threshold.


12 Smart Savings Tips Sue Pullen See Tucson Real Estate

In fact, Bankrate.com's 2011 survey of cash-back credit cards found that 22%  have payouts of more than 1% on all spending and 28% offered higher payouts in certain categories of spending, so it's important to shop around before signing up. Finding the card that best fits your spending pattern can put hundreds of dollars per year back in your pocket for expenses you'd ring up anyway. The keys to success are always paying the balance in full every month and resisting the urge to overspend just for the sake of the reward.

#11 Adjust your tax withholding
If you either receive a large tax refund or get stuck with a big tax bill, adjusting your paycheck withholding is a good move. While many people look at a tax refund as "free money," the reality is that it is your money, and a refund indicates you've made an interest-free loan to Uncle Sam for the preceding year. Give yourself a raise by having less withheld from each paycheck, and you can enjoy that money throughout the year.
If the shoe is on the other foot and you ended up making a big payment at tax time, having additional money withheld from each paycheck can keep that from happening again next year.

The IRS has a tax withholding calculator you can use to figure the optimal paycheck withholding. Then file a new W-4 with your employer's payroll department to put the adjusted withholding into effect.


#12 Refinance your mortgage
How is refinancing considered a savings tip? With wages at a standstill for many families, mortgage refinancing can create some much-needed breathing room in the household budget. Mortgage rates are at all-time lows, and with expanded eligibility for the Home Affordable Refinancing Program, many gravely upside-down borrowers will now be eligible to refinance their mortgages at better interest rates, cutting monthly payments by hundreds of dollars per month.