Four Tips to Start Saving More Money Now

By Pamela Yellen, Author of Bank On Yourself: The Life-Changing Secret to Growing and Protecting Your Financial Future

Building your savings -- not an easy task in the best of times -- has become even more of a challenge. While women typically earn less than men in most occupations, the good news is that women's jobs have mainly held up during the recession. Women have a 20% lower unemployment rate than men, according to a just-released report from the U.S. Department of Labor.

And there's the fact that women live longer and rely on Social Security more than men do, and the already-troubled trust fund will pay out more than it receives this year.  

So how do you build a bigger nest egg when times are tough? Following these four tips will help you take back control of your finances and "bank on yourself."

Be forewarned, however: this isn't the same old advice you've heard many times before. If the conventional ways of saving and investing were really working, wouldn't we already have financial security, in good times and bad?

Saving Tip #1:  Know the Difference between "Saving" and "Investing"

Wall Street and the financial planning industry have led us to believe that "saving" and "investing" are the same thing. However, they are not. The money you have in savings is money you don't want (or can't afford) to lose. Money you invest is subject to loss.  

Most people today "invest to save," and as a result, have no idea what their nest egg will be worth when they plan to tap into it.

This is not a financial "plan," which the Merriam Webster dictionary defines as "a means of accomplishing something." It's gambling. And it has led to a nation of Americans wondering if they'll ever be able to retire, and what they'll have to give up in order to do that.

The typical equity mutual fund investor has actually been losing one percent per year for the past 20 years, after adjusting for inflation, according to the research firm, DALBAR.

Don't put money you can't afford to lose into stocks, real estate or other traditional investments. Before investing, ask yourself if your money didn't grow for 20 or more years, or even went backwards, could you live with that?

Saving Tip #2:  You Don't have to Pay Down Debt before Increasing Your Savings

Often people think they must pay down their credit card balances and other debt, before they can increase the amount they save. But that's not necessarily true.

Case in point: A woman in her fifties who was paying $600 to $800 a month more than the minimum payment due on her credit cards. She discovered that by cutting back to the minimum payment and putting the difference into a guaranteed savings vehicle, she could have a nest egg worth around $50,000 more when she retires at sixty-five. I call this the "better than debt-free" way of managing your money.

Saving Tip #3:  Look Beyond the Traditional Saving and Investing Methods

Consider proven and time-tested ways to grow a substantial nest egg -- without the risk or volatility of stocks, mutual funds, real estate, and other investments.

For example, there is an asset class that has increased in value during every stock market decline and every period of economic boom and bust for more than a century.

That asset is dividend-paying whole life insurance.

A dividend-paying whole life policy grows by a guaranteed and pre-set amount every year. In addition, the growth is exponential, meaning it gets better (more efficient) every single year you have the policy, simply because you stick with it.

This gives you some protection against inflation and provides peak growth at the time you need it most (retirement). And no luck, skill, or guesswork is required to make that happen.

Furthermore, there are options that can be added to the policy which turbo-charge the growth of your equity ("cash value") in the policy. When your policy is structured properly, you can use it as a powerful financial management tool from day one.

Once credited to your policy, both your guaranteed annual increase, plus any dividends you may receive, are locked in. They don't vanish due to a market correction.

These policies also give you peace of mind for retirement planning, because you'll know the minimum guaranteed income you could take in retirement, and for how long you could take it.  

Saving Tip #4:  Saving Doesn't Have to Mean Sacrificing 

When you save up money in the kind of specially designed dividend-paying whole life policy I just described, you can borrow your equity in the policy and use it to make needed major purchases, and your policy could continue to grow as though you never touched a dime of it! (Not all companies offer this feature or type of policy.)

One couple profiled in my book hadn't taken a vacation since their honeymoon eight years earlier. They couldn't justify taking a vacation because they "felt those funds should be saved." And they hated the idea of putting it on a credit card and then having to pay all that interest.

Instead, they borrowed the money from their policy for a one-week vacation at a resort on the Mexican Riviera. They set up a schedule to pay back the loan to their policy over one year, and were thrilled, because "now we'll be able to take a nice vacation every year from now on with those same dollars. The key words are no guilt, because this is a responsible way to do good things for yourself that you wouldn't normally do."

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