Five Ways to Find Money to Save or Invest

You could be a millionaire, if only you could save a single, solitary dime Here are five ways to start:

Adjust your tax withholding. You know that thousand dollars you lend Uncle Sam each year interest-free? Stop it, right now. Have less withheld and apply the difference to your savings or investments. You might as well pocket the return. Besides, doesn't it hurt to pay 18% on your credit card when you have the money invested with your favorite uncle earning nothing? Just don't go overboard. This works best if you are consistently receiving refunds of several hundred dollars. Your Federal tax liability may be different from what you owe the state or city, so you may have to adjust that separately.

Have the money taken directly from your paycheck and invested before you see it. It is called "periodic investment" and most banks and mutual funds do it. In fact, many funds will let you begin investing with a lower minimum balance if you agree to add money according to a set schedule. You can invest weekly, bi-weekly, monthly, or quarterly without additional charge. This also works well with "found money" like small raises. Have the money go into the bank or investment fund before you become used to it.

Starve the middle-man. You won't get any additional return if you pay a sales charge or high management fees. Rather, these hurt return and take money from your pocket for years to come. Look into low-cost fund families like Vanguard, T. Rowe Price or TIAA-CREF and buy directly from the company. When choosing a bank, ask for a "Schedule of fees." This will be hidden away, but all banks have them. It is more important to know that they will kill you with the death of a thousand fees than whether your fifty-dollar account is earning half a percent or a quarter of a percent interest.

Pay attention to the small leaks in your financial ship. John D. Rockefeller famously kept ledgers tracking every dime he spent. Invest in a small notebook and pencil. When you start recording the pastry bought at lunch or the morning paper, you may find yourself less inclined to buy them at all.

Let Uncle Sam help you save. It doesn't really cost two thousand dollars to put two thousand dollars in an Individual Retirement Account. Low income savers receive a retirement tax credit that may effectively cut the cost of saving the first two thousand dollars in half. This credit is available for both Roth and deductible IRAs. And, if you choose a deductible IRA, you get additional immediate tax savings. The IRS has a free publication that discusses these deductions or pick up a copy of "Taxes for Dummies" at your local library for more details.

If you have less money withheld from your pay, apply the difference immediately to the mutual fund or bank account of your choice through periodic investments and take advantage of Uncle Sam's generous provisions for retirement savers, your small start will make a grand finish.