Saving Your Way to Wealth

A comprehensive savings strategy can help secure your financial future

pulls down around $100,000 a year-from a base salary of $25.30 an hour plus overtime for working 12-hour days. More than 75% of that money goes toward his savings, with Dawson’s monthly living expenses adding up to about $600.

Regular saving has other advantages as well. For example, a process called dollar-cost averaging lets you automatically transfer the same amount into your investments each month, guaranteeing that you will buy fewer shares when the price is high and more shares when the price is low.

The third principle of the Declaration of Financial Empowerment-to be a disciplined and knowledgeable consumer-means not sending every extra penny you earn to credit card companies. Typically, most folks have outstanding balances of more than $1,800 per account. The average card carries an interest rate of 18%. That amounts to $325 in interest a year on a typical balance. That’s money that could be working for you in a savings account.

When the Zolliecoffers decided to pay off their debts, they made a list of all their creditors and balances due. “We began paying off the ones with the smallest balances, say $1,000,” says Loretta, who was earning about $30,000 annually as an executive assistant for a start-up money management firm at the time. “Every pay period we would pay them in one lump sum. If we couldn’t pay it off all at once, as with the student loans, we determined how many months it would take to pay it off completely; we went from the least dollar amount to the maximum amount.” (Financial experts usually recommend paying off your highest-interest-rate balances first.)

To reach their goal, the couple lived by an important rule. Always pay more than the minimum amount due. Say you owe $10,000 on a credit card, and the current interest rate on it is 17%. If you send in only the minimum due, you will end up spending $33,447 by the time you pay off your debt-50 years from now, according to Marc Eisenson, co-author of Slash Your Debt, Save Money and Secure Your Future (Good Advice Press, $10.95;

You no longer have the excuse that you need a credit card to rent a car or purchase goods online. A check-cashing debit card from a bank (imprinted with the Visa or Mastercard logo) will do the trick. Merchants will honor these debit cards the same as a traditional Visa card. But instead of accruing a debt-and subsequently paying interest on it-the money is taken right out of your checking account.

When it comes to saving, the rule of thumb is to aim for 10% of your gross pay. The ideal way to accomplish this task is to participate in employer-sponsored savings plans, such as 401(k)s or 403(b)s. Folks who are not covered by a retirement plan at work can make deductible IRA contributions of up to $2,000 annually if their income is under $100,000.

An advantage of 401(k)s is that they enable you to invest automatically. The

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