Boost Your Finances with Savings

Having no savings will eventually break you down financially. Learn to be proactive and start saving today.

The odds of winning the Mega Millions multi-state lottery jackpots are about 1 in 175 million. While it's nice to dream of winning big, most people will have to create their nest eggs the old-fashioned way-by socking away small amounts of cash over time.

An unexpected lawsuit or medical condition can financially destroy any household, let alone one that has no savings. People can sidestep life's disasters, only to realize that having no retirement savings will lead to poverty and poor living conditions in their elder years.

Excuses, excuses, excuses

Americans say that they don't save because they don't make enough money. They argue that living paycheck-to-paycheck pressures the budget so that there's nothing left for extra debt payments and cash savings. Sadly, research has repeatedly shown that Americans aren't trying hard enough. Rather than doing without their small indulgences, they continue to spend frivolously on fast food, movie tickets, and happy hours.

The long-term effects of this unnecessary spending are staggering. Consider a $100-per-month fast food habit, for example. If that $100 is put away every month into a stock market index fund where it can average 10 percent annually, it will be worth more than $8,000 after five years. After 10 years, it will have grown to $21,037.

Jump-starting your nest egg

Replacing your burger habit for 10 years with a brown bag lunch or a dinner at home will definitely help, but it won't create financial security. If you had 20 or 30 years to save that money, things would be easier; your $100 a month would grow to $75,603 and $217,132, respectively. As your investment horizon shortens, your savings potential shrinks. That should be a huge incentive to begin saving today. Here are some tips to get you started:

• Identify your small indulgences. Everyone has his habits: espresso, facials, cigarettes...what's yours? Add up what those habits cost by day, month, and year. How much could you save by cutting back?
• Save half your tax refund. Don't buy the big screen TV as soon as your tax rebate arrives. Put some of that money in a CD or brokerage account.
• Set up an automatic savings plan. Most banks offer automatic savings plans, where money is periodically transferred out of your checking account and into your savings. Set this up and forget about it.
• Pay off debt. Debt costs can eat up hundreds of dollars each month. If you pay off that debt, those dollars can go straight into your savings or investment account. Refinance, consolidate, or get a part-time job. Do what's necessary to pay off your credit cards, and home equity and car loans.

The odds say that the $5 a week you spend on lottery tickets will work harder for you in your savings account. Plus, if you start saving today, you won't be reliant on winning the lottery tomorrow.