So you want to save more money.  Why?

Deciding what you are saving for can make a big difference.  It is easier to give things up if you are doing it for a reason.  When you want to make that unnecessary purchase or you don’t want to bother packing a lunch, thinking about the ultimate goal may give you that last little bit of willpower.

If you are saving to pay down debt, think of how nice it will be to not feel that knot in your stomach each time a bill arrives.

If you are saving for a house, think about how muh fun you will have welcoming friends into your home.

If you are saving for retirement, focus on the freedom you will have to do things that you enjoy.

As a reference, here are some basic kinds of savings you should think about building:

• The Emergency Fund:  This fund should have about six months’ living expenses.  (Look at your monthly budget and mulitply by 6.)  You only use this fund in real emergencies. (Cute boots on sale at Bloomie’s are NOT an emergency.)  Real emergencies are job loss, serious illness, like that.
• The Life Happens Fund: I borrowed this name from Michele Singletary.  This fund (ideally, about $2,000) is what you use for big car repairs or when the fridge issues a death rattle.  (Again, cute boots are not an appropriate use.)
• Retirement: The younger you are, the more important it is to start saving.  If you start saving $100 a month when you are 25, you will have over $150,000 at 65, even if you never increase your contribution. (assuming 5% interest).  Talk to your human resources department at work and take advantage of every vehicle they offer for retirement savings. Some vehicles avoid taxes now and some avoid taxes later.  It’s worth some serious study or a meeting with a fee-only financial planner to discuss what’s best for you.
• Education:  College costs continue to rise at a faster rate than inflation and the debt burdens of graduates continue to grow.  Financial institutions and states offer lots of ways to save for college expenses.  Look to government sponsored sites for a discuission of the options that isn’t commercially motivated.  Also, watch for the impact of savings on the availability of financial aid.  Remember, retirement savings take priority over education savings.  You can get loans for college, but not for retirement.

I am about to see some of my saving come to fruition.  At the end of the year, I will set sail for an 11 day trip to Antarctica.  I have been saving for this trip for many years and I can’t wait.  (Yes, there will be pictures on the blog!)