ou're not alone if it seems each payday like your money's been spent before you even get your paycheck. Many Americans feel the squeeze from Uncle Sam, food and clothing for the family, bills, and housing expenses. So how does the average family put money away for retirement or college education, or even for a family vacation?

With the multitude of ways to spend your money, it's no wonder that consumers typically have little in the way of life savings. In fact, only about half of American workers save for retirement, according to the Employee Benefits Research Institute in Washington, D.C.

"It's really important for folks to save for purchases and emergencies so these events don't put a financial burden on them," says Bill Williams, vice president, branch operations, Arkansas Federal Credit Union in Jacksonville. "Also, we all desire to have a comfortable lifestyle at retirement and it will take a lot of money to afford it."

But don't neglect current needs as you look to the future. "A rule of thumb is to have six months' income in savings," suggests Williams.

The old
savings mantra
still works:
Use it up,
do without,
make it do,
or do without.
1. Direct deposit and automatic withdrawal.
If direct deposit is available through your employer, start by having an amount taken out of your paycheck and deposited into a savings account at your credit union. You'll be surprised how quickly even a small deposit of $25 per paycheck adds up. You'll also be surprised to find that you probably won't even miss it. Once you're comfortable with the amount, increase it.

If direct deposit isn't available to you, check with your credit union about automatic withdrawal. With automatic withdrawal, you tell the credit union how much and how often you would like money transferred from your checking account to your savings account.

2. Pay a little extra on your mortgage.
By increasing your mortgage payment just a little—paying a few dollars extra toward the principal balance of your mortgage each month—you'll save money on finance charges in the end. There may be prepayment penalties that offset some of the benefit although they're usually deductible as interest on income taxes. You may need to include a note to your credit union designating that the extra amount be applied toward the principal balance, not interest. If you pay your mortgage by automatic payment, ask the people at your credit union how to handle extra payments.

And, "If you carry a balance on your credit cards, avoid paying just the minimum balance," advises Williams. "Always pay the minimum plus extra or your credit card debt could last a lifetime."

3. Take advantage of your 401(k).
If you have a 401(k) plan available through your employer, take advantage of it. This goes double if your employer has a matching program, where your employer contributes a percentage of what you contribute to your 401(k).

A little money put away each payday goes a long way. When both you and your employer contribute to your 401(k) and your savings and earned interest compound over time, you'll be amazed at what you can accumulate over just a few years.

Jane John Difference
Annual salary $27,500 $27,500 $0
401(k) contribution 15% 3% 12%
Monthly contribution $343.75 $68.75 $275
Monthly take home pay $1,364 $1,581 $217
Retirement savings after three years
(based on 10% return, 5% employer match)
$19,274 $7,709 $11,565
Source: "Credit Union Basic Guide to Retirement Planning" (ISBN 0-8281-1170-7). To order by credit card, call toll free 800-356-8010, ext. 4157, and ask for Stock No. 21974. Or send a share draft/check payable to CUNA & Affiliates to CUNA Customer Service, P.O. Box 333, Madison, WI 53701-0333. The price is $18.

4. Spend less.
With shopping being a favored American hobby, it's no wonder more than 1.3 million of us filed for personal bankruptcy in 1997, according to the American Bankruptcy Institute, Alexandria, Va.

Fortunately, there are ways to spend less money. With a little creativity and forethought you can develop your own list. To get you started, we've listed some tips for spending less and saving more from "Your Money or Your Life" by Joe Dominguez and Vicki Robin (ISBN 0-67084-331-8). Dominquez and Robin outline a nine-step program to help people gain control of their financial lives. Here are a few ways they suggest spending less:

  • Buy it used. Consignment shops, thrift stores, used book stores, and garage sales offer "gently used" items at significantly lower prices. Check these places for what you need before you pay full price for something new.

  • Don't go shopping. How many times have you visited a shopping mall without intending to purchase anything and gone home with a full shopping bag? Many consumers frequent shopping malls for entertainment. The bright, colorful store lights, tempting smells of the food court, and a sea of clean, brand-new goods are all lures that bring many to the malls each day. This environment inevitably turns window shoppers into buyers. If you want to spend less, stay out of shopping malls.

  • Wear it out. People frequently get bored with items before they actually wear them out. Often, minor repairs and a quick cleaning can make items as good as new again. Before you buy something new, ask yourself if you already have a similar item you can use. This is especially true of clothing. The fashion industry spends millions of dollars each year to make us believe we are out of style if we don't have the latest design.

  • Do it yourself. Public libraries are great resources for "how-to" books. Taking the time to learn how to change the oil in your car, prepare your tax return, repair your clothing, and cook meals can save you a significant amount of money each year.

Building savings requires discipline and persistence. If incorporating all these tips sounds overwhelming, start with just one. When you're comfortable with that step, add another. By using these tips and some of your own, your savings will accumulate faster than you'd expect.

©1999 Credit Union National Association, Inc.