Saving is Something You Should Do Everyday

Americans have forgotten how to save in recent years.

By Jason Zweig, Wall Street Journal

First, we came to regard the stock market as our piggy bank; if we needed a little spending money, surely we could always sell a few shares of stock or a bit of a mutual fund at a profit. Then, we viewed our houses as money machines that would always provide a surplus of cash on a moment's notice, since real estate "never goes down in value."

All that has changed, at least for now. People finally have again realized how important it is to save. After all, thrift was once one of the quintessential American virtues: Just think of Benjamin Franklin intoning, "A penny saved is a penny earned."

Our ancestors knew what we had forgotten until recently: Unless you save, you cannot make your wealth grow. It's much easier to tell ourselves that our horse will come in at the racetrack, or that we will win the lottery if we just keep playing 4-7-10-14-36-51, or that some stock we heard about online is the next Google, or that we can simply use our credit cards to buy whatever we feel like today and pay it all back tomorrow...after our horse comes in at the racetrack.

But Benjamin Franklin was right when he wrote: "Human felicity is produc'd not so much by great pieces of good fortune that seldom happen, as by little advantages that occur every day."
And the biggest of all "little advantages that occur every day" is the simple act of saving money. That, in turn, requires you to become more mindful of where your money goes and why, and whether you are spending it wisely and saving enough.

Here are a few simple ways you may be able to raise your own rate of saving. Each will save you something; together, they will save you a lot.

Drive more efficiently. Driving at 55 miles per hour, instead of 70, will save you the equivalent of roughly 70 cents a gallon, which could easily put hundreds of dollars a year into your pocket.

Before you start your car, get your kids seated and belted and do all your other preparations for driving. This will save you a few minutes' worth of gasoline usage every day. And don't idle your car; if you know you will have to wait more than a couple of minutes, turn it off. For more tips, see fueleconomy.gov.

Conserve energy. Set your home's thermostat to 65 degrees in winter and wear a sweater. Before you go to bed, set it down to 60 degrees and use a second blanket if needed. In summer, set the air conditioning at 70 degrees. Adjusting your home thermostat wisely could save hundreds of dollars annually.

Also make sure your home is properly insulated and that windows, doors, chimney and the basement are properly sealed. Here, too, the annual savings can be in the hundreds of dollars. For more advice on saving on fuel bills, see energysavers.gov.

Walk or bike to work. If it's feasible, walking or biking, instead of driving or paying for a bus or train, could save you $5 a day, $25 a week, $1,250 a year.

Don't buy lunch every day. Instead, make and take your lunch to work. Better yet, pull together a brown-bag club with a few friends, with each of you bringing your own food plus something to share. You could save another $1,250 a year.

Cut back on dining out. Take a cooking class. You will acquire skills and recipes that you can use to make better food in your own home than most restaurants serve -- and you will be able to make it for a fraction of the price.

According to the U.S. Bureau of Labor Statistics, the typical American household spends $6,133 a year on food, 44% of it on meals eaten outside the home. When you do go out, don't be afraid to skip an appetizer, share an entrée or split a dessert. Always inquire how much the specials cost. (Specials are typically no better than regular menu items, but they tend to be more expensive.)

Don't order the second cheapest wine on the list, as many people do to avoid embarrassment. Instead, unabashedly order the cheapest one. It's usually almost identical in quality.

Quit smoking. With cigarette prices at roughly $5 a pack, someone who smokes two packs a day could burn through $70 a week, or more than $3,600 per year. Smoke like that for 20 years and, if you are still alive, you will have spent roughly $75,000.

Rent DVDs free from the library. Depending on how often you rent, you could save $100 or more a year.

Put your refrigerator on ice. Before you open the refrigerator, pause for a moment to see if you can move several things in or out at once. Every time you open the door of the fridge, you make it work harder. My guess is that a family that becomes more mindful about opening the fridge can save about 50 cents a week, or $25 a year.

Don't shop on an empty stomach. Walking into the supermarket when you are hungry can make you more inclined to buy food you don't really need. Eating a light, nutritious snack before shopping could easily save you $ 100 a year, not to mention several hundred calories a week.

Don't sign up for insurance, service contracts or extended warranties. Avoid the added cost of these extras for appliances and consumer electronics -- especially on things like cellphones, which you probably won't lose or damage and are likely to use for only a couple of years.

Manage credit-card spending. Pay with cash or checks when possible. Credit cards are essential for a few things, such as online purchases, car rentals and airline tickets. But you can do fine without them most of the time.

And ignore the minimum payment on your bill. You should be paying the maximum you can afford. If the minimum payment is $20, but you owe $774.84, see if you can pay $200 (a little more than 25% of the balance) or even $80 (about 10%).

Also, if you can find a credit card with a better rate somewhere else, switch. You can compare rates at federalreserve.gov/Pubs/shop/survey.htm and at bankrate.com.

These are only a few ideas for economizing. You will have others, many of which will be better than mine. Send your favorite suggestions on saving to intelligentinvestor@wsj.com.