Simple Habits that Help You Save Money
Saving money is simple for some and a ton of work for others. Depending on who you are and what you do, the first step to save money is often figuring out how much you’re spending.
As incredible as it may sound, people who don’t have anything left at the end of the month don’t really know where their money goes. A $100 there, a purchase on a needless software here and poof goes their savings.
So, the first step is to know thyself.
Know your expenses
The first step to financial freedom is knowing where you stand with respect to expenses.
You need to know all your expenses. That means knowing the cost of the coffee you bought from Starbucks, keeping track of bills, and travel expenses. You must note down even tips.
With this data in hand, the next step is to organize these numbers by their proper categories, say gas, mortgage, rent, groceries, and others and add up.
You can also tally this against the credit card statement or bank statements to make sure you haven’t missed anything.
Get a free-spending tracker to get started with this. There are multiple apps and websites that can help.
There are also bank-level spend and budget tools and software to help with this. With this categorize your transactions and make budgeting easy on the mobile app.
Budget for savings
Once you know how much money you’re spending in a month you can record expenses in your spreadsheet file.
Now that you know about the amounts you’re spending in a month, you’re in a better position to add your expenses to a budget that works. The budget should keep track of your expenses so that you plan the spending wisely. You also want to avoid overspending as much as possible.
You also need to set aside a little amount to factor in miscellaneous expenses.
These are expenses that might occur that might need not occur month to month.
Discover how you can reduce some of your spending
In addition to this, if you see that your expenses seem to touch the sky, you need to find some ways to cut back. There are a dozen nonessentials that you can cut back on. Find out ways to reduce fixed monthly spendings say the cable tv or switching to a low-cost phone carrier.
Here are some smart ways to cut back on spending:
If you’re someone who frequently visits hotels and restaurants and spends a high amount on movies, you would rather go to soup kitchens to help out or attend community events.
Also never keep subscriptions that you’re not using. They renew every month and cancel out whatever gains you made.
Eat just once a month in a restaurant. Try street food because they’re cheap or go-to cheap eat outs.
Decide on savings goal amounts
I found a great way to save as much money as I want way earlier in my career.
Know what’s that? Imagine a goal for which you want to save.
It can be your big wedding, or dream vacation or even saving up for your kid’s college education. Think of how much you need and the time it will require you to reach that.
You can divvy up your goals into either short-term or long-term goals.
Also set aside an amount for emergencies.
The long-term goals are over 4 years plus. It can be down payments on homes or remodeling houses or funding a kid’s education.
It can also be getting out of debt like student loans.
If the goal is retirement or say your kid’s college then an IRA or a 529 plan that doubles up as a tax-saving vehicle and an investment that builds up your portfolio is the way to go.
Investments always carry risk so plan out everything in advance.
The best way to have a fun-filled life is to set aside something for short term goals so that you don’t wear yourself out thinking of the future all the time. These small goals are easy to reach and are fun as well.
Decide the most important things in your life
Don’t let anyone mislead you. The most important goals are ones that make the most impact on your life and where you want to give the most savings.
The most important goal in your life might be to plan your old age life your retirement.
So that should take the front seat when compared to other short-lived goals.
These saving goals are the most important so you can keep accruing money for the same.
Park money safely
When you’re saving either for something on the horizon for the long term or for the short use FDIC insured deposits parked away safely.
Use a certificate of deposit that keeps your money locked away for a duration that’s longer than savings accounts. This typically gets you a higher rate of interest.
When it comes to long term goals use IRAs that save tax and also park money in mutual funds. Most funds give you between 10 to 14% return on your money.
There are hundreds of options. Study them all carefully. Decide the minimum amount and save the rest.
Have another bank account
If you don’t think about saving money then you can automatically save money. Confused?
Here’s how it works.
You can transfer money from one account, say your salary account, to your other savings account. By making this automated you make sure you don’t touch this amount needlessly. You can set up the transfer, say 5k each month and that money is saved.
Trust, me these are the simplest habits that help you ascertain where the money goes and how to shore up the said amount.
What do you think of our tips and tricks to save money? Do let us know in the comments below.