A Penny Earned is a Penny Saved

A Consumer Federation of America report from 2002 addresses the plight of the "wealth-poor" in America. These are the 25 percent of U.S. households struggling from paycheck to paycheck, with assets under $10,000 and an average debt per household of over $15,000. For these folks, a lay-off or major illness spells financial disaster.

As disturbing as those figures are, there are a lot more households living under these circumstances than those statistics show. Some folks, unfortunately, hold low-paying jobs and do not earn enough to make ends meet. However, other households simply spend more than they earn. Bankers often see many individuals and families who put off saving, who spend more than they make and who don't plan ahead for their financial future.

Living hand to mouth creates tremendous anxiety in an already stressful life. If you find yourself barely making ends meet and you know, deep in your heart, it's because you spend more than you make and lack the discipline to curb your spending habits, here are some suggestions to help you get control of your financial future.

Start by developing a budget. Track your spending habits, including small expenses like coffee and movie rentals, as well as large expenses like rent or mortgage and car payments. After a month or two, make a list of where your money is going and look for ways to cut back. Obviously, you can't eliminate your heating bill, but do you really need to spend $100 a month on cable or your cell phone?

Create a savings plan. Once you've determined where your money goes and where you might be able to cut back, calculate how much you can save. Check with your employer to see if you can have money automatically withdrawn from your paycheck and deposited into a savings account. If that's not an option, set up an investment in which the funds can automatically be withdrawn on the same day each month and deposited directly into your investment account.

Take advantage of your employer's 401(k) plan. Many companies match employee contributions, up to a certain percentage. And, since the money is automatically taken out of your paycheck, it's put away someplace safe before you can spend it. Additionally, because 401(k) contributions are pre-tax, your total taxable income will be less each year.

If possible, set up an emergency fund. How will you pay for that unexpected $350 auto repair? If you're able to save $90 every month (eliminate that $3-a-day latte habit and put it into a savings account instead), you'll have over $1,080 in savings over the course of a year.

Find other ways to save money. When was the last time you shopped for less expensive auto or home insurance? Would refinancing your home lower your monthly mortgage payments? Do you use coupons when you grocery shop? If you get paid every week, some months you'll get five paychecks instead of four. If you get paid every other week, some months you'll get three paychecks instead of two. Put those extra paychecks into your savings account. At the end of the day, throw your extra change into a jar. You'll be amazed at how quickly it all adds up!

Get rid of debt. Cut up your credit cards and pay cash. If you absolutely must keep a card, shop for a card with a lower interest rate. On existing credit card debt, try to pay more than the minimum monthly payment.

As the adage goes, a long journey begins with a single step. The same principle can be applied to savings — every penny adds up.

Contact your Johnson Bank personal banker for more information.

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