7 Effective Ways to Save Money and Build Wealth

From bonds to DRIPs, these payroll deduction investment plans build savings habits and discipline. Take a tour and learn how to take a snapshot of your net worth with money coach Deborah Owens, author of A Purse of Your Own: An Easy Guide to Financial Security.

One of the most effective ways to build wealth is to set up fail-safe ways of paying your purse first. You can accomplish this through automatic investment programs in both mutual funds and stocks. Systematic investment programs help you acquire discipline, focus, and the savings habits needed to stay the course through the ups and downs of the economy.

• Savings bond payroll savings plans: Allow you to purchase savings bonds through payroll deduction. Visit www.treasurydirect.gov to set up an account through payroll deduction.

• Mutual fund debit programs: These are also known as automatic account builder programs. You will authorize mutual fund companies to debit a preset amount from a bank savings or checking account to buy fund shares on a weekly, monthly, or quarterly basis. Many mutual fund companies reduce their minimum investment to establish accounts from $2,500 to $50 monthly. These types of plans are great for long-term goals like retirement planning and college savings. If a mutual fund offers this program, that information will usually be listed under the payment methods. You will need to provide your bank information and a copy of a voided check or a deposit slip.

• Mutual fund reinvestment programs: Reinvesting all dividends and capital gains distributions into more shares of the fund provides an additional method for helping your investments grow. When you establish an account with a mutual fund, simply check the box on your initial application indicating that you would like to reinvest your dividends and capital gains.

• Direct stock purchase programs: A number of companies allow you to purchase their stock direct, without using a broker. To determine if a public company will allow you to directly invest, visit the investor relations area of their website. Many Fortune 500 companies such as Walmart, Disney, and Procter & Gamble have this program. Visit www.computershare.com for access to hundreds of companies with this type of program.

• Dividend reinvestment plans (DRIPs): Companies offer their shareholders the opportunity to reinvest their dividends in more shares of the company, and in some cases, buy additional shares at a discount with little or no brokerage commissions. You must already own company shares in order to enroll in a dividend reinvestment plan. This is an excellent way to automatically accumulate additional shares of a company.

• Small investor stock purchase programs: websites such as www.buyandhold.com and www.sharebuilder.com allow investors to conduct research and establish automatic investment programs and purchase stocks for as little as $4. Unlike investing through a broker with account minimums of a $1,000 or more plus commissions, these online accounts allow you to purchase fractional shares monthly for a nominal transaction fee. These are a great starter investment accounts that can show our daughters how to research and invest in stocks. Your daughter can also build a fantasy stock portfolio and “invest” at www.401kidz.com, which is sponsored by Sharebuilder.

• Periodic investment programs: These plans are contractual agreements that require you to invest for longer periods of time, typically ten to fifteen years. The commissions assessed on these types of programs can be up to 50 percent of your monthly investments in the first five years. Always check the prospectus to see the amount of commission being charged. These plans place a premium on convenience but can be hazardous to the wealth of your purse. Visit www.finra.org to read their investor alerts.

ORGANIZING YOUR PURSE
In order to keep track and monitor your investment programs, it is important to have a system that allows you to take a snapshot of your portfolio and net worth. Here are a few ideas that can assist you in keeping your purse in order.

SOFTWARE PROGRAMS

• Quicken Personal Finance software: This software program allows you to consolidate the information from all of your accounts in one place. You can have your bank and investment accounts automatically downloaded to this program and bring record keeping into the twenty-first century.

• Microsoft Money: This software program allows you to consolidate banking and investment accounts. You can also download account information from other investment and mutual fund companies.

• PNC Virtual Wallet: PNC Bank has online banking software that allows you to manage your finances virtually from anywhere. This online banking software focuses on managing cash flow and savings goals.

• Online banking platforms: Most of the major banks have online banking sites which allow you to pay bills online and consolidate your outside investment accounts. Bank of America, Wells Fargo, and PNC Bank all have this type of service to help you monitor your cash flow and track your net worth.

WEB-BASED FINANCIAL TOOLS

• Mvelopes.com (www.mvelopes.com) is an online expense management system that was based on a manual bill paying system used by many families. This is a great tool for budgeting and cash flow management.

• Foonance (www.foonance.com) is a personal finance service designed with families, couples, and the average person in mind. Foonance lets users quickly import their bank statements and other financial information so that new users can get started managing their money quickly. Users can set up different transfers between accounts and schedule transactions such as mortgage and student loan payments.

• Wesabe (www.wesabe.com) is an interactive Web-based personal finance monitoring tool. This tool lets you manage your finances by directly interacting with your bank account, savings account, or credit card, putting it a step above other financial tools that only reflect the information you remember to input.

• Money2Manage (www.money2manage.com) allows you to manage multiple accounts so that you can keep track of several different transactions in one place. It is also easy to set up a list of payees so that you can keep track of who needs to be paid what and when they need to be paid. You can easily create categories to make it easier to track different types of accounts.

• Spendji (www.spendji.com) is an all-in-one personal finance management tool for families and friends who have a great deal of planning to do. The site helps families create budgets that the entire family can follow; this includes handling bills, groceries, discretionary spending, and much more. Families and friends can also use Spendji to communicate and share important dates and news.

Microsoft Money and Quicken provide you with the most comprehensive method of tracking and recording your financial information, and they make filing taxes a breeze. However, the initial setup will require you to obtain all of your account records and passwords, which can take more than a few hours of your time. The Web-based programs focus on budgeting and cash flow management and most have communities that offer money tips and support.

ABOUT THE AUTHOR
Deborah Owens, author of A Purse of Your Own: An Easy Guide to Financial Security (Copyright © 2009 by Deborah Owens), is the CEO of Owens Media Group, a Wealth Coach on MyGeneration TV, and the Lead Blogger on AOL.com’s MoneyTalks blog, and she is also a featured speaker on T.D. Jake’s finance-focused conference tours. She lives in Maryland with her husband and two children.

LEARN MORE

• Read the Introduction to A Purse of Your Own: An Easy Guide to Financial Security
• Learn more about the author
• Browse more articles about personal finance