Appendix 2: How to Find Money to Invest

Our journey continues, but this is the last stop, honest. If, for some reason, you made it this far and are still flummoxed about how to save money, then here are a few bits of advice:

 

1. Forget the budget, just save. Budgets don’t work for everyone, so just invest at least 10 percent of your annual income and set aside at least four months’ worth of expenses in a money-market account.

2. Save automatically each month. You can set up an automatic withdrawal from your checking account into your money-market fund. Simply give your banking information to your fund manager and they will electronically debit your checking account for a set amount each month. If you can’t touch it, you can’t spend it.

3. Save for your goals. Planning to buy a new home, car, or appliances? Save for it. Pay cash. Don’t put it on your credit card and you’ll save on finance charges.

4. Only use your credit card for things you will have the money for. If you pay off your credit card balance each month, you are not spending beyond your means.

5. Fully fund all of your long-term investment accounts. These include 401(k)s, 403(b)s, college-savings plans, Roth IRAs, SEP-IRAs, Keoghs, SIMPLEs, and Education IRAs. Money growing tax-deferred always beats money that you hand over to Uncle Sam. If you have spare cash from a bonus, windfall, or inheritance, tuck away the maximum allowed in tax-deferred accounts.