Avoid credit card temptation, save more

Here at ‘Grow Your Green,’ we’re all trying to save more money — whether it’s for a new iPod, like Jillian, or a Harry Potter book set, like Shreya.

Me? I’m saving for a rainy day. The last 18 months have shown us that the U.S. economy is fragile and we should have some padding in our savings accounts to weather this storm. I know, though, that for many of us it’s hard to save money if we’re paying our huge credit card bills every month. And Americans owe a lot.

According to CNN Money, the average American household with at least one credit card has nearly $10,700 in credit card debt.

How did we get here? Well, it can get too easy to depend on credit. Some of us charge everything — from dinners to cashmere sweaters to vacations and even rent — and then tell ourselves that we’ll pay it off eventually. (I’m just as guilty.) The truth is this dependency on credit puts many of us deeper and deeper in debt.

But, despite what you may owe, saving money, even in a down economy, doesn’t have to be painful. Here are some steps to becoming financially healthy and reaching your personal finance goal:

Use your debit card
Avoid using your credit card as a loan, and use your debit or check card instead. This habit forces you to only purchase the things you can afford, as opposed to charging that fancy pair of overpriced shoes or the latest plasma TV.

A lot of times, when I go shopping or out to dinner, I leave my credit card at home and just bring my debit card or cash with me. (There’s less guilt at the end of the month, and none of those awful feelings that you’re drowning in debt when the dreaded monthly statement comes in the mail.)

If that doesn’t work, you could also request a lower credit card limit. All you have to do is call the issuing bank, and they can set that up. Having a lower limit means you’ll have less to charge… and more to save!

Set a goal
Ask yourself what you’d like to save for. Do you want a new computer? A family vacation? Your dream home? Figure out the cost, and how much you can save on a weekly/monthly/yearly basis to reach that goal. This way you can establish a time frame. You can also track your success regularly with online banking. (I personally love watching my savings account balance grow!)

And it’s not that hard either. If you stash away just a few dollars a day — maybe bring your lunch to work a couple days a week or skip the daily coffee run — and put that money in your savings account, before long you’ll have reached your goal. For example, imagine setting $20 of every paycheck to be directed to your Tech CU savings account:

$20 x 2 pay periods = $40 saved per month
$40 x 12 months = $480 saved per year

That’s $480 you could save a year! And chances are, you won’t even notice that $20.

Set a budget
Now that you have a goal, figure out how much you can spend (and save) per week to reach the goal. Then stick to the plan. Also keep track of where your money goes. A latte here, a movie ticket there, and things can really add up.

If you have an iPhone, you can get an application that helps you track your expenses. This is helpful because you can actually see how much money you’re spending, where it goes, and how much more you can save by adjusting your daily routine.

As you trim your expenses, here are some other things you can consider:

- Can you move to a less expensive apartment or house? Can you refinance your mortgage?
- Can you consolidate your debts into one loan with lower interest rates?
- Can you save money on a more fuel-efficient car? Maybe give up a car altogether?
- Can you get a better price on auto insurance? Sites like insurance.com and netquote.com give you a side-by-side comparison on rates for auto, home, life and health insurance policies.  Be sure to shop around to make sure you’re getting the best price.
- Can you live with fewer cable channels? Premium cable packages are costly, but you could save thousands by switching to a different cable plan.

Pay down your debt
It can be frustrating trying to save if most of your money is going to your credit card payments every month. Start paying down that debt as quickly as you can. It may feel painful in the beginning, but the sooner you eliminate your debt, the sooner you will be able to save.

Still hesitant to part with your cash? Consider this:

Let’s say you owe $5,000 on a credit card with an interest rate of 18%. You make the  minimum payment of $200 every month. It would take you almost 10 years to pay off this credit card! And you would end up paying nearly $2,650 in interest!

I don’t know about you, but I’d rather use that money for something more worthwhile — like a Hawaiian vacation or a new car.

If you want to know how long it will take to pay off your credit card debt, the Debt Reduction Planner is a useful tool.

Open an interest-bearing savings account
I have found that it’s much easier to save money if I keep it my separate from the spending money in my checking account. You can also get better interest rates on a savings account, so that the money that you’re saving works for you. ( Hey, if you haven’t already done so, how about opening a ‘Grow Your Green’ Great Savings Challenge account?) And if you have a longer savings goal, consider other savings accounts options like CDs or money market accounts with higher interest rates.

Be patient
Saving to reach a financial goal takes a lot of time, hard work and discipline. In the beginning, brown bagging your lunch or spending a Saturday night in may seem like a huge compromise. Trust me, we all feel like that at some point but once you start to see your savings balance grow from $20 to $40 to $1,000 — and the pride and security that comes with having a reliable savings account — it will get easier.

Oh, and your GYG community is here to support and encourage you too. So let’s start growing some green… and let’s start sharing our success stories!