How to Save Money like a Pro

Recent data shows that the average savings rate for Americans is at an all-time low. According to the Bureau of Economic Analysis, a division of the U.S. Department of Commerce, the average savings rate was a little over 1% of personal disposable income as of September 2008.

People know they should save, but always have trouble either starting or sticking with it. Here is a guide of simple tips to help you build your nest egg.

Make the decision to save, and open a savings account! Many people never start saving because they don't have any "savings" to start with. This is a silly concept. You have to start from somewhere, even if that somewhere is $0. Open a savings account with no minimum balance requirement. Shop online for the account with the best interest rates and lowest fees. A good resource for this information is BankRate.com.

Create your savings goals. Write down how much you want to save, and your desired date to accomplish this. Be sure your goals are realistic. Review your progress towards your goal monthly to ensure you are on track. If not, make the necessary adjustments.

Develop a spending plan. This will help you manage your expenses and maximize your savings. Determine how you will spend your money-how much for housing, auto, entertainment, shopping, etc-and stick with your budgeted amounts for each category.

Track spending weekly. You will be amazed to find out how much money is spent on frivolous items. For every trip to the vending machine at work, every night out with friends, and every muffin from the bakery downstairs, lots of money is thrown out the window. If you track how much you actually spend each week, you can easily see where expenses can be cut-and where you can save more.

Use cash more. Part of the reason individuals overspend is because we heavily use credit and debit cards, and never keep track of what we actually spend. If you begin to withdraw cash from your account for your weekly spending, it will be much easier to see how quickly you are going through the money. In addition, using cash will make you reconsider whether or not a purchase is necessary.

Automatically divide your paychecks between checking and savings accounts. You won't miss what you don't have, right? Set up your paycheck so that a certain amount of funds are directly deposited into your savings account. This practice will force you to live within your budgeted amount for living expenses and bills.

Save for retirement at work and take full advantage of matched employer contributions. Most employers match a portion of your retirement savings, so take advantage of this free money. Even if you can't save the maximum amount allowed by the IRS, at least save the maximum amount that your employer is willing to match.

Put extra funds-tax refunds, bonuses, and raises into savings. Most people make the mistake of thinking that since they make more money, they should spend more money. Instead of going out and purchasing a new depreciating asset (for example, clothes or a new car), save your extra money. Live on the money that you made before, put the additional funds in an interest-bearing account, and watch your savings grow.

Build home equity by paying down mortgage loans. A significant portion of the average American's net worth is in the form of home equity. Build your wealth faster by sending just one extra loan payment per year. This extra payment can be made in one lump sum during the year, or to make this even more manageable, divide the amount of the extra payment by 12 and add that amount to your normal monthly mortgage payment as an additional principal payment. When you decide to sell your home, you will be happy to reap the benefits of your home equity. Even if you decide to stay in your home for 30 years, getting rid of that mortgage payment seven to ten years earlier will be a sigh of relief.

Be patient-it takes time for your savings to grow. Unfortunately, some people have the expectation of wanting to see lots of money very quickly instead of gradually building their nest egg. Don't make the mistake of putting large lump sums into savings accounts with the hopes that their money will grow very quickly-unless, of course, you can still live within your means without the money you've put into savings. The flaw with this method of "saving" is that it is not able to be maintained. Instead, you find yourself continuously "dipping" into your savings account, which ultimately defeats the purpose.