Find Extra Money to Meet Your Goals

At one time, it all seemed so easy. Just keep putting a small sum of money away each month, and it will grow, sometimes dramatically, to help you reach your goals.

Since 2000, investors have received a rude awakening. The markets don't always go up. In fact, from time-to-time, they can decline somewhat dramatically. The harsh reality many are waking up to is that their goals for the future may be in jeopardy.

For instance, someone who was saving $250 per month ($3,000 per year) for 20 years through 1999 would have accumulated $509,280 toward their goal (based on the average annual return of the Standard & Poor's 500 Stock Index, an unmanaged index of stocks — you cannot invest in the index). The average annual return in that 20-year timeframe was 17.88%. By June, 2002, while another $7,500 would have been invested ($250 per month), the account would be worth just $360,194, a result of a significant market decline over a more than two-year period.

This investor is not making as much progress toward achieving his or her goals as was once the case. That could mean the investor needs to save more money.

Where to find the money
If you find your investment return expectations aren't being met, it may be time to re-think your goals. Either you have to reduce the target amount of money you hope to accumulate, or you may need to invest more money to make it to your goals.

How much more may depend on your situation. If you think you can't spare another dollar to meet your investment needs, think of this — if you can save just $5 a day, that will amount to another $150 a month (in a 30-day month). Invest an extra $150 per month at a hypothetical 8% annual return for 20 years, and you will have accumulated $89,388. That's serious money from a starting base of just $5 a day.

10 places to find the extra dollars
Here are ten simple ways you can find that extra $5 a day:

1. Try brown-bagging your lunch. Do this three days a week, and you could easily save an extra $10 to $15 every week.
2. Cut down on daily extravagances like fancy coffees or other treats. There are cheaper ways to get your caffeine fix or meet your sugar cravings. Find them, and set the savings aside for your portfolio.
3. Plan your shopping trips more carefully. Good planning can reduce "impulse purchases" when you shop for groceries or other necessities.
4. Put savings from refinancing your mortgage to work. Many of us have been able to reduce our monthly house payments thanks to recent low interest rates. Instead of spending it, invest it.
5. Refinance high interest loans. If you are making payments on credit cards or other high-cost loans, find cheaper ways to refinance them to reduce your monthly costs.
6. Negotiate major purchases. With good research and comparison shopping, you should be able to cut down the cost of cars, TVs or other major purchases.
7. Cut back your clothing budget. The quality of your retirement years from now may depend on a willingness to be less fashionable today.
8. Find entertainment bargains. From lower-cost matinee showings of movies to free shows and festivals in your town, look for ways to reduce your entertainment budget.
9. Check your tax withholding carefully. Tax rates were recently reduced. You may be withholding more from your paycheck than you should. Re-do your W-4 and use the savings to invest instead.
10. Invest your pay hikes. The next time you get a raise, see if you can avoid spending the extra money, and instead direct the salary hike into your retirement plan or another investment vehicle.

Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.