Saving doesn't come easily for us young adults. Entry-level salaries don't give you a lot to work with. And, well, we also tend to spend what we make -- and then some -- on the latest gadgets and flashiest fashions.
But don't worry. We're not doomed to frivolity and the wreckage it can make of our finances. Here's how you can start saving smart throughout 2012:
6 Strategies to Save More This Year
6 Strategies for Young Adults to Save More in 2012
Periodically calculate how much you spend. What better time to review your budget than at the start of a New Year? "It's really hard to [track your spending] each month, so aim for just once or twice a year," says Jill Boynton, a certified financial planner in Newington, New Hampshire.
Just be sure when you do it that you track everything. Boynton recommends filling out a spreadsheet with a month's worth of spending. Or you can try an online budgeting tool such as Mint.com (See our slide show: Which Budgeting Site is Best for You?). But note: Mint works best for those who deal mostly in plastic as opposed to cash. When you make an ATM withdrawal, the site labels the transaction as "Cash & ATM." Unless you diligently manage your cash transactions (you can manually edit Mint's labels), you can easily lose track of where the money goes.
The drudgery of tracking spending can pay off when you find surprising expenses you could easily cut. At the end of 2011, I crunched my own numbers and found that I shelled out about $200 a month at Starbucks and other restaurants. I'm sure I could cut that by at least half. That's like finding a $100 bill every month in my back pocket.
Open a separate account to keep your hands off some of your cash. Use your checking account for regular expenses, including rent, utilities, food, clothing and even entertainment. But think of your savings account as off limits.
If you set up automatic transfers to your savings account, you won't even notice the money is missing from your checking account. And by paying yourself first, you avoid spending everything and having nothing left over to save.
It's true that living in a low-interest-rate world makes it harder for your savings to grow. Find banks offering the highest rates at Bankrate.com, and look for accounts with no required minimums and no fees. As of late January, Ally's savings accounts fit the bill, yielding 0.84% with no required minimums and no fees. Sadly, 0.84% qualifies as "high yielding" these days, but it's better than nothing, and it keeps your money secure. But, as Boynton notes, "with interest rates so low, you need to be saving even more."
Even if your salary is on the low end, you can always save at least a little bit. In fact, Susan Veligor, a certified financial planner in Portland, Maine, says the best way to start saving is with really small amounts that will eventually add up big time. For example, stash away just $25 a week, and in six months you'll have a cool $650. In a year, your cash pile will grow into $1,300. Plus, starting out slow and having small successes will reinforce the habit.
Play money mind games with yourself. Here's one: When you're spending money, don't just think about the price tag; also think about how much money you had to earn before taxes. The mind trick will force you to realize that you had to earn, say, $12 to pay for that $10 movie ticket.
Another savings trick: When you're budgeting, round down your income and round up your expenses. For example, if your phone bill is $92.37 per month, budget for $100. If your monthly income is $1,692.99, round down to $1,600. This move guarantees you'll live below your means and free up some money to save each month (Read: Just Say No to Extras to Save Money).
"It really is easy to spend nowadays," says Veligor. "You have to disconnect yourself from society [to avoid it]." One tactic that saves me a lot of money is finding time on the weekends to plan out my lunches for the week. Buying my lunch supplies on the weekend helps me avoid splurging for $10 or more each day on convenience foods. I also eat healthier this way.
Set savings goals. Having a worthwhile target in mind, such as a luxury vacation or (thinking more long-term) a happy retirement, will help you remember that saving is not about denying yourself what you want today; saving is really about working toward future rewards. Plus, with a specific number attached to your goal, you'll be forced to figure out how much you'll need to save each week and month to reach it by a certain date.
Seeding an emergency fund should take first priority for your savings. You should have at least three to six months' worth of living expenses, and the money should be risk-free -- that means savings accounts insured by the Federal Deposit Insurance Corp. -- and instantly accessible.