If You're Doing These 5 Things, Your Saving Efforts Are for Nothing

It's not easy to save. We average earners live on razor-thin margins and have trouble even imagining saving. Once we start saving, something "comes up" and the savings begin to diminish. (See also: The 10 Things Everyone Should Be Saving Saving For)

And all of that can feel okay if the savings are slowly accumulating over time. But the most soul-crushing setbacks take us back to zero, and negate all the hard work we're putting in. These are the ones that to be avoided at all costs. So take a close look at this list, because if you're doing these five things, your saving efforts are for nothing.

1. Saving Without an Investment Account

Yes, it's hard to start investing. There are so many options and so many types of accounts. What are small caps, even? But here's the thing: A savings account is only a piggy bank. An investment account has a snowball effect. Over time, if you choose the right plan for your goals, your money can grow far beyond the rate your checking and savings institution provides. If you can have pulled from your paycheck pre-tax, you will come out ahead on income taxes. Another plus? You can't sneak money out without incurring penalties, so it's there for good. Learn more about investments like mutual funds, bonds, and more and get your money working for you in the long term.

2. Buying Big Ticket Items on Credit Cards

An important tip to avoid losing your savings is to only buy what you can afford in liquid cash. This means big ticket items such as furniture, appliances, and cars should not be financed or purchased on a credit card. The interest you will end up paying in the long run will eventually outstrip how much you're putting away in savings. Unless you're expecting a windfall, this could potentially lead to having to prison break your funds and starting from scratch. Learn how to avoid credit card debt on large purchases.

3. Tapping Into Your Retirement Fund

Let's say you do have an investment account. It's easy to get tempted by the large juicy number in your IRA or 401(k) when in a pinch. Retirement accounts do allow for loans or withdrawals on account of "hardship" — a financial emergency that cannot be predicted. However, consider what a hardship really is. If the reason is not an unexpected death, natural disaster, or even a mortgage crisis, then you should not pull funds from your investments. In the end, you are only short-changing yourself. The average person expects to continue working until age 66. Will you be able to support yourself during retirement if you tap into your fund?

4. Not Using a Budgeting Program

One of the easiest ways to maintain a regular savings schedule is to use a budgeting program like Pear Budget or Mint to ensure you are not overspending. Set a goal amount, then work backwards to figure out how much you should save each week or month. Then stick to it! A great plus is that you can also use the same tools to plan vacations, weddings, arrival of a baby, and more. As life changes, your budget tracker will tell you the story of your spending habits. You can revise the budget when you see differences in your spending.

5. Not Creating a Buffer for Emergencies

Emergencies happen. Unfortunately, one can easily conflate a savings goal with the idea of saving for a rainy day. Remember what you are saving toward — whether it be a home, retirement, or a new dirtbike. Consider what would happen to that awesome goal if you had a car accident, or if the TV breaks. Don't want to lose ground after working so hard? A separate account that is only for emergencies should contain at least $1000 but three months' salary is ideal. Once you've made the account, forget about it until danger strikes.

Are you making any of these spending and budgeting mistakes? Are they harming your savings?

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