Strategies to Saving

It was at the age of 47 that Cheryl Derricotte realized she needed to be disciplined about saving money. “There I was with a spotty savings and no emergency fund,”  says Derricotte, who works for an environmental nonprofit in Oakland, California. “I knew that I had to think about retirement, something I’d not been too serious about.”

A determined Derricotte kicked off her savings strategy last year by allocating 10% of each paycheck via automatic deductions to her organization’s 401(k) retirement plan. She also began contributing directly from her checking account $300 per month into several American Funds mutual funds (which can be liquidated without penalty).

To offset the money she was putting away, Derricotte also started budgeting. For instance, she now saves some of her discretionary income in an “eating out” envelope. When the envelope is empty, she stops eating out. She drives a used 2005 Mazda and has also cut back on new clothing purchases. Those cutbacks allowed her to bump up her monthly 401(k) contributions to 15% in 2012. She’s now socking away $900 per month in total savings.

“It took some belt-tightening, but the payoff has been significant,” says Derricotte. “Knowing that I’m putting money away and that I’m not only building a nest egg but also a rainy-day fund gives me peace of mind that I never had before.”

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