How to Save Money
By saving money today you will thank yourself in the future
We get it. Saving money is challenging, especially if you’re on a tight budget.At the same time, if you want to have more money, you’ve got to save more. Learning how to save more effectively – even if you’re not flush with cash – will help you avoid going into debt, pay for those expected expenses and get ahead financially.
Are you ready to join the ranks of “savers”? Take a look at our top 4 ways to save money.
1. Create a budget
The first step to saving money on a tight budget is to actually have a budget.
That’s right. How often have you heard people say that they’re on a “tight budget and can’t spend any money right now?”
In many cases these same people haven’t even put a budget into action. So, before you start complaining that you can’t save any money, it’s time to create a budget.
This is essential as a budget gives you a clear picture of exactly how much money you have coming in each month, what your expenses are, and how much you have left-over to save.
To get started, take a look your monthly bills, bank statements and your monthly spending needs, including rent or mortgage payment, car loan payments groceries, utilities, rent, clothing, and fun money.
When you factor all of this into your monthly nut, you’ll then see how much you can save.
If you want to take it a step further, you can implement a budget that works best for your particular money management style, or lack thereof. Here are four main budgeting styles that can help you get a jumpstart:
The 50/30/20 budget
This budgeting style divides your money into three piles: necessities, wants and savings/paying off debt.
Necessities should comprise about 50 percent of your take-home earnings. Another 30 percent can go towards things you want.
The final 20 percent is for savings. This is a great starting point to get into the budgeting groove.
Just keep in mind that if you have substantial debt to pay off, you may need to earmark more than 20 percent to savings/debt repayment.
The beauty of this budget is that you can tweak the percentages to work best for your needs.
In this type of budget, every single dollar has a purpose.
In a nutshell, each month you’ll figure out how much money you have to spend and save, and by the month’s end, you’ll be left with zero.
This means every cent you have goes towards either your bills, your savings or your miscellaneous spending.
If you’re the type who likes to know where every penny is going, the zero-based budget may be ideal for you.
On the other hand, you’ll have to spend a lot of time managing your budget. Also, if an unexpected expense pops up, this may throw everything off.
Budget for different savings goals
This is a great way for you to start saving for various goals, while ensuring that you also have money to pay for your monthly expenses.
To get started, factor in your spending needs and wants for the month. Then, take the leftover amount and divvy it up – putting it into various savings accounts for different goals.
For example, you may want a savings account for emergencies, another for travel, and still another to spend on your pets.
The point is: you’ll be savings for various goals every month. This is sometimes called “paying yourself first.” It’s a great option if you want both flexibility and discipline.
The old-fashioned envelope system
The envelope, please.
Believe it or not, this cash-based budgeting method works well for spenders who prefer to actually see the money and need an incentive to stop spending in excess. By using cash only for spending, this can also help curb rising credit card debt often brought on by spending more than you have.
To get going, you’ll take exactly the amount of cash you need each month. You’ll then divvy up the amount into envelopes labeled accordingly for different spending categories, like groceries, gas and clothes.
For example, if you start the month with $175 in your grocery envelope, that money has to last you the entire month. Why? When it’s gone, it’s gone, according to personal finance expert Dave Ramsey.
This doesn’t mean you can’t eat if you blow through your grocery cash too fast. It just means you may need to work with leftovers or get creative with what you already have in your refrigerator – until it’s time to replenish that envelope.
Remember: if you’re an overspender, the envelope method helps you start saving in two ways: you can only spend the cash in the envelopes and you can deposit any remaining cash at the end of the month into your savings account.
Now that you you have a great overview of the different budgeting methods, you can figure out what’s best for you. After that, it’s time to put your budget into place. To do this, you can either use a good old spreadsheet or download a budgeting app like You Need a Budget (also known as YNAB) or Mvelopes.
Automating may be No. 2 on this list, but it’s often the top money-saving hack for many newbie savers. By automatically designating a certain percentage of your paycheck or monthly amount into your savings account every month, you’ll be on your way to boosting your savings – without even thinking about it.
To get started, ask your employer or human resources department if you can split up your direct deposit paycheck and earmark a certain amount to go into your savings account.
The rest, like usual, will go into your checking account. Chances are: you won’t miss the amount in your savings account. Better yet, it will no longer be readily available to spend.
At a minimum, financial experts recommend saving 10 percent of every paycheck. Of course, if you can directly deposit 25 percent or more every time you get paid, go for it!
3. Shops for deals
Even if you’re not an overspender, it costs money to live your life. Yet, there are ways to save money on the things you buy and services you use.
So, take a look at your household bills and ongoing expenses, including money you spend on your entertainment. From here, you can begin to research other viable options that may be less costly, such as switching to a new cell phone provider or wireless service.
You can also scout out deal sites to see where you can save money in your local area on services, restaurants and even gyms. If you live in Toronto, for example, a simple search on Groupon turns up a multitude of discounts on everything from spas to pet supplies to food.
While you’re curbing your spending, here’s another pro tip: watch those memberships and subscriptions. If you aren’t using them anymore, ditch them.
Keep in mind that it’s easy to sign up and forget about these ongoing monthly charges. But, they add up and can put a serious dent in your bank account.
Recently, I took my own advice and scrutinized my memberships. The result: I canceled my Amazon Prime and my monthly subscription to Ancestry.com – saving me about $41 a month or almost $500 a year!
4. Use credit cards wisely
Spending more than you can afford on a credit card can lead to mounting debt. At the same time, credit cards can also help you save money, particularly if can switch to one with a lower interest rate or with cash back rewards.
To help you find the best credit card, it’s important to shop around and compare card benefits. Not sure where to begin? Try LendingArch, where you can sort through and compare dozens of credit cards side by side.
While there is no sure-fire way to save more money, these 4 hacks will help you get on the right path starting today. All it takes is a little discipline and a commitment to improving your financial future. Are you ready to give it a try? We thought so!