For most of us, knowing how to save money is difficult — especially if you’re already struggling. However, it can be done. Follow these realistic money saving tips to get started.
1. Lower Your Monthly Bills
Are you paying too much monthly for things? When we have monthly payments for things, sometimes we forget that there are other companies willing to get your business by lowering costs for you. Some ideas include:
- Get a phone and data plan for as little as $15/month with companies like Mint Mobile.
- If you have a large enough amount of debt, you may be able to lower your monthly payments by using a debt consolidation service like Curadebt. This could save you a lot of money and time as well.
- Lower your auto insurance bill by switching to another provider.
- Contact your cable and internet company and ask them to reduce your monthly bill. Tell them you are considering switching to another provider.
2. Determine Where Your Money Goes
The first thing you need to do is get a handle on where you’re spending your money. At the beginning of a month, grab a notebook or phone app and enter every transaction you make no matter how big or small. At the end of the month, make sure it matches up with your credit or debit card transactions, and be sure to include any automatic payments.
This may be the most important thing you do. It can give you insight into how you’re spending your money and ways you can do a better job of saving. Did I really spend $80 at the coffee shop this month?
3. Don’t Budget, But Do Make a Plan
Are you one of those people that makes New Year’s resolutions? Less than 10% achieve their goal. 45 million Americans start a diet each year. Only 5% are successful long-term.
There’s a reason diets don’t work for most people. When you’re trying to avoid eating, food actually starts to look more appealing. The very thing you’re trying to resist becomes even more tempting.
While budgeting works for some people, most of us will benefit more from a spending plan.
Budgeting feels restrictive and feels like your denying life’s pleasures. When you save your money for a goal, however, you’re working towards something.
Think about what’s truly important to you. Is it a dream vacation or a new car? Do you want to save for a house? Creating a plan to accomplish your goal helps you make better spending decisions. Each time you’re making a wise spending decision, you’re getting closer to achieving your goals.
4. Pay Off Debt
Saving and investing your money is great, but first, you need to pay off any debt you have.
Here’s why. The average savings account right now is paying significantly less than 1% interest. If you save $10,000 and keep it in the bank for a year, you’ll earn less than $50. If you have $10,000 in credit card debt at an average of 16% and make only the minimum payments, you’ll have paid $2,300 and still owe $9,275.
If you only make the minimum payments of a $10,000 credit card balance, it can take you 86 months to pay it off at a cost of more than $17,000.
One of the best ways to save money is to pay down your debt.
5. Pay Yourself First
When you only save with what’s left at the end of the month or after each pay period, saving becomes a discretionary expense. It’s just too easy to make that impulse buy or put off saving until next time.
Paying yourself first makes saving a mandatory expense. Treat it like any other bill that must get paid.
One of the best ways to do this is to take advantage of any automatic deduction plans your employer may have. When you save money in a 401k, for example, it comes up before taxes and before you even see it in your bank account. Even adding small amounts — especially if you start early in your career — can add up over time. A 25-year-old putting just $10 a week into a Roth IRA would end up with more than $130,000 at retirement.
Another money saving tip is asking your employer to do direct deposit and typically can split your deposit. Consider putting a portion into a separate account to save towards your goals.
Managing your finances doesn’t mean you have to adopt a frugal living lifestyle, but practicing some easy ways to save money can help get you started. The sooner you start, the faster you will reach your goals.