You don’t have to wait for the right time to start organizing your next trip or down payment. There’s no excuse not to follow these 7 easy tips if you really want to save money.
We’ve all been there. You have this dream, a resolution that comes and goes, unfulfilled, with every passing year. You want to travel, buy a car, or settle down, but you simply can’t seem to save up enough money to manage it. Maybe next year, right? Wrong. That’s precisely the mentality that’ll make you look back in regret repeating that dreadful phrase, “what if…” You need the will, not just the goal. And one of the hardest things to set your plans into motion is taking that first step. That’s what we’re here for. Knowing exactly what kind of things you must keep in mind to save money is key. You must realize that the goal is not merely to not spend money unnecessarily. The idea is to actually manage to save up. So, for those who truly wonder how exactly to save money, here are 7 easy tips.
1. Keep a record of your expenses
The first thing to do is get organized. And in order to manage that, you should figure out exactly where you stand. How much do you spend every month, and why? Start gathering your receipts, keep track of every transaction, and use categories to sort each of them. Soon enough, you should know how much you need for rent, food, services (internet, gas, electricity, etc), entertainment (movie tickets, dates, drinks with friends, etc), and all other such expenses.
2. Determine your minimum budget
Once you know exactly where your money is going, you need to figure out which of your expenses are truly necessary and which aren’t. Try to figure out how much you need just to make it to the next month, lacking all and any luxuries. You don’t yet need to actually cut expenses just yet, just calculate what is the least you can send each month. Do consider things like rent, services and food, but just the bare essentials.
3. Establish your short and long-term goals
Now, look into the future, and consider what you want. What are your plans for life? What exactly do you want to save money for. Think and distinguish between short-term goals (such as traveling, getting an emergency fund, insurance, or even a car) on the one hand, and long-term goals (such as moving to another country, ensuring your retirement, or buying a house) on the other. They are not mutually incompatible, but the more expensive (or numerous) short-term goals you have, the harder it will be to achieve your long-term ones.
4. Set priorities and cut the nonessentials
Now comes the hard part: time to make sacrifices. You need to figure out exactly what you’re willing to give up in order to accomplish your objectives. So, take a look at your expenses record and compare that with your minimum budget and with your goals. Choose where you want to cut expenses. Perhaps you can find a cheaper internet provider, or maybe you should let go of that premium streaming membership. Consider that the more luxuries you hold on to, the slower your progress will be. To help you minimize your unnecessary or impulsive urges, here are three simple tips: the matching rule, the 24-hour rule, and the value-per-hour rule.
The matching rule consists of always depositing the exact same amount you spend for a luxury into your savings account. To match your expenses with your savings, if you will. If you cannot afford the match, you cannot afford the luxury. The 24-hour rule means always waiting 24 hours before making a purchase. Looking at some beautiful shoes online? Take a day before you press that buy button, maybe tomorrow you’ll realize it was just an impulse. Finally, the value-per-hour rule entails calculating value in terms of hours rather than dollars. If you figure out during your 24-hour wait that, based on your current salary, those shoes actually cost 12 hours of your labor, you might think twice before you buy them.
5. Open a special savings account
It’s essential that you have a separate bank account to administer your savings. It should be an account completely separate from your main one, meant only for deposits rather than withdrawals. You also have to choose the right kind of account for the job. For short-term goals, a regular savings account will do, but you could also go for a Certificate of Deposit or something similar (depending on your country), which locks your money in place for a set amount of time. For the longer term, consider tax-efficient accounts or even investments (stocks, funds, etc).
6. Immediately deposit all the surplus into that account
Based on your minimum budget, as soon as you get your paycheck simply deposit everything you won’t use on your savings account. You have to be very honest with yourself. Stay true to that bare minimum of monthly living expenses. Be strict with your limits.
7. Don’t touch your savings account
If there’s any unforeseen or emergency payments, try to use a credit card and pay that with your next paycheck. It’s better to pay that debt immediately when you yourself get some cash than to take out money under the promise that you’ll deposit it again next month. Those promises rarely succeed in the long term, so the more you avoid them, the better. Do be careful with you credit record, though.
So, there you have it. If you follow these 7 steps, one at a time, you’ll be surprised at just how much you can actually save. Watch that savings account grow and enjoy whatever it was you wanted to save for.
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