How to Save Money on a Budget

Saving money without a lot of extra income can be very difficult. When life is paycheck to paycheck, saving takes a back seat to surviving. That is, until unexpected expenses arrive and there's no money around to pay them. When that happens, having a safety net is essential. Don't be discouraged; saving is easier than you think!

First things first, you'll need two bank accounts: a savings and a checking.

More and more places are offering savings accounts with interest rates approaching five percent! At www.capitalone.com, you can open an online savings account with such a rate. Link it to your online savings account to your checking account at a traditional bank, and CapitalOne will give you unlimited money transfers between the two with no fees. This offers another, less obvious advantage. Money transfers at CapitalOne take three days. If you're a compulsive spender, this will give you three days to think about any money you're about to spend.

Almost every bank offers checking accounts with no annual fees. Washington Mutual even gives you free checks. There's no reason to have a checking account that charges you tons of fees. Look around until you find a bank near you that offers a good, fee-free checking account and switch to them. If you have to buy your own checks, pay as many bills as you can online to avoid having to use them.

Many banks offer good deals if you have both your savings and checking accounts with them. Bank of America, for example, offers the "Keep the Change" program. When you subscribe to this program, Bank of America will round up every purchase you make with your debit card to the next dollar and deposit that "change" into your savings account. Shop around, do some research, and find the accounts that are right for you.

Once you've got the infrastructure in place, we can start saving. The rest of this guide is going to assume that you have enough to monthly income to live on; that is, your income covers your expenses, even if it is just barely. If you aren't quite getting by, then apply these techniques as much as you can. A lot of them will help you to increase income and lower expenses.

Total up your monthly income from your job. This will be easy if you already keep a written budget, as you should. This is what you'll live on. If you have extra money here, don't hesitate to save it, but don't feel like you have to. However, if you want to save money, you have to be careful to live within this amount. Spend beyond it, and you won't have anything around to save.

Now we'll need to generate money to put into savings. The idea here is that every single penny that you bring in above and beyond your base income gets saved. Lucky for you, generating that extra money is easier than you think.

1. Save your change!
This seems old and busted, but we're going to take it a step further. Not only are you going to throw all your loose change into the jar, you're also going to throw in every bill you get that's smaller than a ten. At the end of every month, take that jar to your bank and put it straight into savings. It will add up much faster than you think.

2. Save your Savings!
Clip coupons. Get a credit card that gives you a percent or two cash back, and use it (responsibly, of course, pay off your balance at the end of every month). Mail in all those annoying mail-in rebates. At the end of the month, look back at your receipts, look over your credit card statements. Total up the money you saved with coupons and cash back, add in your mail-in rebates. You've just generated even more money to save.

3. Sell your old stuff!
Have a yard sale to get rid of all the stuff that just sits around and takes up space. Sell whatever you can on eBay. If you don't use it, there's no reason to keep it. You might as well liquidate it and let it generate interest for you!

4. Buy and sell!
eBay has created a great way to generate some extra savings. Spend a weekend looking through garage sales and flea markets, and buy things that you think you can re-sell on eBay for more. It will only take you a few trips to get an eye for what sells and what doesn't. With practice, doubling or tripling your investment will be a bad weekend. Have any collections or hobbies? A lot of highly collectible or desirable items can be found at garage sales for change, simply because the seller didn't realize its value. Check out my guide on how to effectively sell an item on eBay, and generate even more money to save!

5. Money is everywhere!
You can mow your senior neighbor's lawn. You can get a plow and clear driveways of snow. You can write articles for Associated Content! There are tons of ways to pick up a little extra money.

But why keep saving money? Once you have a nice little chunk in savings for emergencies, why not just blow whatever you make on DVD's and fast food? I'll tell you why: interest.

Let's say you manage to save $200 a month. In an account earning five percent, you'll have over $10,600 in the bank in four years! Without interest, you'd have $9600. That five percent earned you over $1000!

If we look long-term, things get even better! If you continue to save that $200 a month for 20 years in that same five percent savings account. Without interest, you'd have saved $200 a month, 12 times a year, for 20 years. That totals $48,000. However, factor in that five percent interest, and you've got over $82,000! Thats almost $35,000 just for letting your money sit there! That's an awesome amount for a kid's college fund or for your retirement! Invest in mutual funds and stocks and garner a ten percent return, and you're looking at over $150,000 in 20 years! Starting to see what your money can do for you?

Saving is never easy, especially when money is tight. The temptation to tap into your savings for a big screen TV or a vacation is always going to be there. As you can see, however, a little bit of extra work can go a long, long way toward making life a lot easier and a lot less stressful.