We all know saving is hard, with the current economic status, there isn’t much left over after paying rent, electricity and the daily upkeep. However, to get out of the hand to mouth cycle, saving is inevitable. Everyone wishes to attain the financial freedom that allows you to achieve your long term goals in life.
Saving money is important for accomplishing ones dream of owning a car, a home and even having a family. We come loaded with good news though, you don’t have to be a financial expert or accountant to succeed. Read on for some useful tips on how to save money.
Set out your goals
How do you want your life to be? Do you want to travel more? Pay off loans and live debt free? Do you want to buy a home or a car? However you envision your life, most likely the plan needs money. In order to achieve these dreams you need to set out an account that you can be putting in money every month.
It’s not enough to day dream, write down your dreams/goals and an estimate of how much it will require to achieve that goal and the amount of time you have until you attain it. Have a clear plan for your financial goals, it will give you something to look forward to and work for.
What’s your monthly spending?
Part of creating a budget is calculating how much you are currently spending in order to know how much you will need to cut out. Take a look at your cash receipts and credit card statement to approximate how much you are spending, you might be surprised at the figure.
Look at what goes where and identify which parts you need to minimize and what you totally don’t need. Knowing the areas you are overspending on will help you divert the money into saving.
Set a monthly budget
Any financial adviser will recommend you divide your income into the 50/30/20 rule, 50% of your salary goes to necessities, 30% fun money and 20% goes to saving. If you follow this rule, you will be in a better financial position.
It is also important to put your goals into consideration to see how much you can be able to save. If you are unable to meet your savings goals then you need to cut off on the spending or find a way to increase your source of income.
The necessities Account
When creating a necessity budget start by outlining the non-negotiable like rent, insurance, transport, utilities, mortgage etc. These are the things you cannot live without. After adding up this amount, subtract it from your income after tax to see if it is less than your income then you are in a better saving position.
The fun money Account
After taking care of the non-negotiable, then divide the remaining of the salary into 20% savings and the remaining 30% for all the fun you need in your life. You can use money to travel, shop, gifts and any other thing that you do not consider a need.
It’s not enough to set the money aside. When creating the fun money budget, add up what you have been currently using you might be surprised at how much you might need to cut back from this account. You might need to vacation some place, minimize shopping or maybe start a side gig.
While it is necessary to have a fun account, you might consider saving more if you have more fun goals that you would like to achieve in future.
The savings Account
Just because it comes last on the 50/30/20 rule, it doesn’t meant it is less important. It is actually recommended to put this money aside before the fun account budget. Figuring out how much you need to save will be determined by what kind of goals you want to achieve.
If you have not been saving at all this will need a lot of discipline.
So how do save money each month
After creating your budget, you will be in a better position to see the areas that have been taking a lot of your money and what you can cut off.
Some ways that you can save include;
- Renting out a cheaper apartment in a different but secure neighborhood. If relocating is hard, you can consider getting a roommate.
- Carry lunch instead of buying since this food will be part of the necessities budget. While on the food subject, cooking more instead of ordering take out is another great way to save.
- Friday night out with friends might be harming your budget more than you know. Consider cheaper activities like hosting a game night.
- Consider working out at home instead of paying monthly gym membership, it is now so much easier with the help of YouTube.
- Buy second hand clothes
- Freeze meals to avoid cooking every time and chances of ordering out.
- Refinancing your mortgage can get lower interest rate which will reduce your monthly payments.
- Have a shopping list when going shopping to avoid impulsive buying
- Switch your cell phone provider or internet provider. Look at cheaper options available in your area.
- Get a budgeting app, budgeting for first timers may be a bit hard but more so, seeing how much money you are spending on real time can help with the discipline.
Sometime it’s not enough to cut down on the spending, consider getting a side hustle to support some needs. Creating a budget is not complicated if you take time to think on your goals, how long it will take you to achieve them and what you need to do to get there. It will not be easy to overturn your spending habits, it needs time, patience, discipline and knowing how you want your life to pan out.