4 steps toward a more secure financial future

How to Start Saving

by Doris Dobkins

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Trouble Saving Money?

You're drinking water instead of juice. You're cleaning your own house and mowing your own yard. Eating out is a twice-annual luxury and your car looks older than you!

So what's the problem? You're saving costs every way you can but your bank account doesn't show it!

If you're like me, you tend to save a lot but then spend the savings on other things instead of taking it to the "bank".

Here's a plan to help those of us who want to invest but don't quite know how to start.

First of all, create a budget. At the very minimum, write down on a piece of paper how much money you spend on what each month. This will give you some guidelines to work with. You don't want to save at the expense of creating debt but you don't want to under save at the expense of wasting money.

Not sure where to start with making a budget? The affordable Home Budget Spreadsheet from SimplePlanning.com makes budgeting simple.

Step two. Every time you save some money, whether it is through coupons, eating at home versus going out, or whatever, calculate the savings and put it aside.

If you go to the grocery store and your coupons save you $20, take the $20 and put it in an envelope or specially designated savings account. When you get a $10 rebate in the mail, put it in the same place. Do this until you have $250 saved up.

Step three. Now, take that money and go on-line. Find a stock that's been performing well or a high growth mutual fund and buy $250 worth.

If you've never invested on-line before, it's a piece of cake. You can place your order online. If you have any questions, give the organization a call and they can walk you through the process over the phone.

Related: 3 Questions You Need to Ask Before Investing

So do it! Make your $250 investment and feel good about yourself. You now have something to show for all your money saving efforts and sacrifices. It's a great tangible feeling of accomplishment and it's a great start for investing. If it takes you three months to collect the $250, that's not bad. If you can collect it in one or two month's even better. Maybe you have lots of money leftover each month and you can save it every two weeks.

Step Four. Don't start spending your savings now. We aren't done. It is time to start over. As quickly as you can, save another $250 and this time pick a different fund to invest in. How about a technology or telecommunications fund? Always diversify. Purchase your second batch of stocks/funds from a different sector. (i.e. oil, drug, technology, retail, banking, etc.)

Continue this pattern until you have 5-8 different investments, each with $250. Then repeat the cycle. Add the next $250 to your first investment for a total of $500. Then contribute to the second fund and third and so on. You can repeat this cycle as long as you want.

Do you need some ideas on where to find more money for investing? Here are some: Once your bills are paid off, invest your former credit card payments, cars loans and/or lease payments. Invest any raises or bonuses you receive. How about your income tax refunds?

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There's a famous saying from Warren Buffet: "If you're not going to hold stock for ten years, don't touch it for ten minutes." Think long-term and benefit from the wonders of compounding interest. Saving $3,024 annually ($252/month) at 15% return compounded annually will be $309,789 in 20 years. In 30 years you would have $1,314,669. In 40 years you would have $5,379,969. 15% return is very realistic these days. If you get better than 15% return, then you will achieve these results even sooner.

If you are young, you've got time on your side. You can easily be a multimillionaire by following this simple investment strategy. If you are a baby boomer, it is not too late either. Start now so you won't look back and wish you had!

Updated June 2017

Doris Dobkins is a money saving expert, author and speaker and has helped thousands of people find ways to save money and get out of debt.

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