How do you save money? Ideas while saving, investments?

[plkdb]

Well me and my wife are stationed overseas for the next 3.5 years in the UK. We are finally at a position where we can start saving our money, instead of going essentially month to month (whatever money is leftover at end of month after bills is fun money), so yeah time came to grow up. Been married for a year and a half, I`m 26, shes 23. Well, we get a housing allowance from the military, which here is about 1200 a month with my rank, and one dependant, although it just went up. Anyways we want to buy a house when we get back to the states, so we kind of just fell into saving, but now we are seeing how easy it is for us, and how its going to add up. When we got to the UK, we took out a car loan through a credit union, but had to start a savings account so we put a allotment in for 50 over the payment amount. I went away for 3 months to the desert, and when I came back, we decided that we could save more, so basically what we did, is each of the 3 raises I have gotten since coming into the country, we have bumped up that allotment, the car will be paid off in 14 months, so we`ll have that money going in as well, anyways I figured in that, as well as paying off one other loan, and it looks like by the time we leave here, we will have accumulated just under 40,000 but she has gotten more onboard, and is going to start contributing as well, I know long story, sorry. I still contribute 10% of my pay to a 401k, but am looking for ideas on what to do with the money thats accumulating, in our savings account . And was also wondering if anyone else has any systems for saving?

[Menagerie]

Wow!! I wish I wasn't living so close to the bone. I am definitely interested in what others have to say.

[plkdb]

Well, I will say one big thing helps us save money.... The exchange rate. Right now, its almost 2 dollars to 1 pound. Which I still dont understand, because if I buy a something off base, its 1 pound, if I buy it on base, its 1 dollar. I dont understand the logic behind it all, but whatever. So, its pretty much out of the question to go off base right now to buy anything. We still have credit card bills, but are working hard at paying them off, and hope to have them payed off by the time the car is. Along with her student loan. I dont make that much money by any means, we are just finally starting to put it in the right places. The big thing about the savings program we are on, is we know we can live comfortably with what we were on 6 months ago, so why not continue that trend instead of spending it on stupid stuff? Plus with the government giving us our allowance, we need to put that money to work instead of throwing it away on rent [acronym:bd02d1e41d="As soon as possible"]asap[/acronym:bd02d1e41d].

Also with it going into an account that we dont have an ATM card for or checks to, it makes it more difficult to access the account for a impulse buy, or daily use, because we actually have to take the time to go into the bank.

[dustybrannum]

I would say start collecting and get a good amount, say 1000-5000, open up a mutual fund with a good return. Also make sure it is diversified across all sectors of business and not only in say oil or autos. A few years back a good return was 10%. I do not think you can get that now but you can get as much as you can. Shop around for it. Do not get the first one you come across. Visit several banks. Once you open that fund set an amount you want drafted out of your account directly each month. If you let it sit and do not touch it, it will grow with the economy seeing as it seems the recession is almost over things should rebound some since our current president will not have to worry over re-election issues. I know you will be back in around 3 years but fight the urge to draw out all the money, just take what you need and pay a good bit down on your house but still get a loan and make payments to help your credit, just shop for a low interest rate. DO NOT MISS A PAYMENT!! This is where everyone and there mom will start messing with your interest rates. Read the fine print where they talk about missed payments. Even missing a payment on your credit card can affect other loans with interest and vice versa. Read up on Capital Ones lawsuit they are in right now. Well i am rambling but that is they way i would go. Good luck to you and I hope you do well. I know one company that has done fair in the past is Janus. You may look into them. Any other thoughts or ideas are very welcome.

[Jchillin]

Saving money is a very disciplined thing. The fact that you were able to live "hand to mouth" for this period shows great discipline.

You need to let the excess grow over a period of time as Dusty states. "It doesn't exist". Once grown, you have some long and some short term options:

1. Mutual Funds (as Dusty mentions) - Long term
2. CD's - Shop around, get best return rate available - short term
3. Employers in the States usually have 401K plans that you can throw a significant
amount into. Place percentages across Equities, stocks, bonds, etc. (Not all eggs
in one basket) (This is the LONG TERM)

**Very important - If you haven't already done so, get a copy of your credit report

[acronym:d14a66cc5d="Hope this helps (or) Happy to help"]HTH[/acronym:d14a66cc5d]

[FawnN]

My husband and I used to live from paycheck to paycheck too. It's nice to have a little nest egg for retirement.

Besides our normal contributions to our 401K, we always set aside at least 200 every biweekly into our savings. Most companies will allow you to do a direct deposit to more then one account.

We never miss it cuz it's already gone from my check. And before you know it, you are saving for vacations, emergencies, and of course that 125 gallon tank.

CD's are really good. Make sure you do your homework though to make sure you get the highest interest rate possible.

[RogerMcAllen]

Paying off credit card debt is a better investment in the long run than putting money into savings, I would start there.

[Hara]

You do not have to start with a large lump sum for mutual fund investing. Many companies offer DCA options (Dollar Cost Averaging) into mutual funds. Some as little as 25.00 per month. Alot of new parents use this method for college savings and it is incredibly effective. The key is to stick to a quality mutual fund that has a nice track record over at least a 10 year period (if not more). I work for a brokerage firm and I see the results on a daily basis.

[QTOFFER]

It's great that you are thinking of this in your mid-20's - your investments will really benefit from the power of compounding interest.

The best way to start saving is to target one of your high interest rate debts and try to pay it off as quickly as possible. Suppose you have a credit card balance with an APR of 16%. Basically, any money that you pay above the minimum required amount is, in effect, saving (you can also look at it as earning) you 16% per annum. You can't do better than that anywhere!

So, set aside a certain sum of money (one that you will be able to comfortably manage) for that debt every month until it's paid off - if it's an installment loan, see if you can double up on some payments. Then, when the debt is repaid, continue making those payments - except make them to your investment account. Make this saving regiment a high priority event every month - a non-negotiable payment to your future. Meanwhile, continue contributing to your 401K because it offers tax advantages on top of savings efficiency.

Try to get into the habit of paying off your credit cards in full every month. I treat my credit cards as a deferred check, a convenient alternative to carrying cash, and a free short term loan. Banks make very little money off of me because I won't let them!

I'm not a big fan of CDs right now because their interest rates are barely outpacing inflation. In addition, they are not very accessible in case you needed the funds for an emergency - the penalties for early withdrawal are harsh. Finally, the interest is fully taxable as regular earnings.

I prefer low cost mutual funds, especially index funds that attempt to replicate a particular segment of the stock or bond market. Because they're not actively managed, their annual costs (expense ratios) are low and most don't charge a fee (load) to get in or out. The Vanguard Group http://flagship2.vanguard.com/VGApp/hnw/PersonalHome pioneered this type of investing, but nearly all mutual fund companies now offer low cost/no load mutual funds. Your mutual fund investments are completely available if you incur an emergency, and best of all, most of their earnings are not taxed as badly as regular bank accounts are.

For a beginning investor, I would recommend either a balanced index fund (40% total bond market/60% total stock market), or a total stock market index fund. Once you get your feet wet and are more comfortable with mutual funds, you can then decide to diversify your investments by buying other funds.

[QTOFFER]

If you want a completely liquid, FDIC insured savings account, check out ING Direct. Their rates are very good and there are no minimum balances or fees.

http://home.ingdirect.com/