Are Your Prepared to Save? Six steps to help get you started

In 1701, Benjamin Franklin said, ?If you would be wealthy, think of saving as well as getting.? His emphasis on the importance of saving set America on a course for high savings levels and tremendous economic growth. In recent years, however, the importance of saving has been replaced by an insatiable desire to spend. According to the U.S. Commerce Department?s Bureau of Economic Analysis, this quarter marks the eighth consecutive quarter of negative personal savings rates in the United States.

The personal savings rate is defined as that fraction of personal income that is not consumed. In other words, for the past two years we have been spending more than we have earned! The U.S. savings rate has been gradually sliding since May 1985, when Americans saved 11.1 percent of their disposable income.
Has your savings rate been gradually sliding over the years? If you want to get back on track with your savings goals or just start with a new savings plan, here are six tips to help you get started:

Establish a new budget built around your savings goals. You may be surprised to learn that most people do not have a written budget and those that do look at savings as what is left over after they spend. Putting your savings goals first forces you to consider them first, and ensures that they will be given the priority they deserve.

Look retail, buy wholesale. Often, when we want something, we want it today! One element of preparing yourself to achieve your savings goals is to change your mind-set about spending. In this regard, when you see something that you want to buy, force yourself to only buy the item 20 percent cheaper than it is being offered to you. We all know that there are retail prices and much lower wholesale prices for the exact same item. Look retail, but force yourself to buy only wholesale and save the difference.

Use your piggy bank aggressively. When you were a child, your parents may have given you a piggy bank to save excess coins. In preparing to save, you want to break out your piggy bank once again, but this time use it more aggressively. Instead of just saving loose coins, consider putting in your piggy bank any cash below $10. Thus, if you use cash to purchase any items and get change of $5 or $1, this money goes into your piggy bank. Clean out the bank every six months and put all the coins and dollars that you have accumulated into your savings account, then start again.

Change your reward system. Many of us do not reward ourselves at all for good behavior and when we do, the reward comes in the form of spending. I propose that you change your reward system from spending money to spending time doing something free that you enjoy. When you meet your monthly savings goal, take a day off from work and walk in the park, go to a free museum or go to the library and read something that you enjoy. At the library you can also check out movies free of charge. Rewards can come in many forms, but the best ones often cost nothing.

Become a planner. In preparing to save, get into the habit of planning big-ticket purchases, vacations, everything that has to do with spending. In this way, you can take advantage of seasonal price differences that will reduce your cost and increase your ability to save without impinging on your fun.

Give up something. Saving often requires sacrifice. You may be required to give up one or several things to meet your goal. Keep in mind that the little things can mean a lot, so if you are used to getting that $5 latte every morning, shift to preparing your coffee at home. If you usually buy a new outfit for Easter Sunday, wear to church what you wore last year.

Getting back into a pattern of saving can be difficult, but it is necessary if you want to have anything to show for your years of hard work. Having savings also is a fundamental requirement for building wealth. Ben Franklin summed up this notion when he said, wealth ?depends chiefly on two words: industry and frugality; that is, waste neither time nor money.? ???

David Hinson is the founder of Wealth Management Network in New York City. Call 646-375-2388; visit; E-mail: