In an age of massive consumer debt, credit cards run amuck, astonishing national debts, and banks closing their doors, there are plenty of reasons to save money.
Unfortunately, many people have never been educated on how to save money.
But we’ve got some good news. There are an astonishing number of ways to save money these days, all of which can give your budget a serious boost.
Here are some of our favorite money-saving tips.
Why Save Money?
Trying to save money can be frustrating, especially as the bills pile up faster than you can pay them. But saving money is essential. It’s your financial safety net and a way of protecting yourself in the event of unforeseen circumstances.
Saving money is about taking a common-sense approach. Oftentimes, the best way to save money is in making small changes. Things like switching to generics and cutting back on $6 lattes can leave you with money to spare at the end of the month.
Ultimately, saving money involves one key principle: Discipline
It’s easy to understand why you should put money away. What’s hard is actually understanding how to save money, and then choosing the strategies that work for you and your budget.
Saving starts with a good savings account.
Shop around and compare interest rates of different bank savings accounts. Just remember that some savings accounts require a minimum deposit and/or a minimum balance.
Once you’ve got a savings account, it’s time to start putting money into it. Here are some simple suggestions that will help you fill up that new savings account.
Five Big Steps To Take To Save Money
There are many reasons to save money and many methods to utilize. Some of these money saving tips are big, overarching suggestions, while others are smaller and more practical. Here are our big picture tips. We’ll hit the more practical suggestions below.
Tip #1: Create Your Emergency Fund
Start by building an emergency fund. This is a critical part of an overall savings plan. When deciding on an amount for your emergency fund, think about this: if I or my spouse lost employment, would we be able to cover our bills for three months? Or, ask yourself, if one of our cars needed major repairs, what might that cost look like?
Tip #2: Create Your Budget
The second step is to establish a budget. Take a look at every receipt and expenditure for the past couple of months. Figure out what your necessities are, how much you spend on recreation, and how much is leftover for saving.
There are several good budgeting programs out there, like Quicken. Or, you could use the old-fashioned budget with cash and envelopes. If you overspend a lot, the envelope budget system uses a set amount of cash for each spending category. After the cash is gone, you have nothing more to spend.
Tip #3: Implement Automatic Savings
Another option is automatic savings. Most banks will give you the option of transferring money from your main account to a savings account on a given day each month. You can also have your employer deduct a certain amount from your paycheck every pay-period and deposit it in a retirement account.
Tip #4: Prepare For Retirement
Speaking of retirement, you must start saving for retirement as early as you can. People don’t maintain their lifestyle after retirement by saving in a savings account. Retirement plans offer the miracle of compound interest that builds wealth.
And, if your employer offers matching contributions to your retirement fund, take full advantage of it. Invest the maximum you can to receive the most from employer contributions.
Tip #5: Save Your Extra Money and Loose Change
Save bonuses and tax refunds. It’s tempting to use that money to treat yourself or give your family a new, expensive appliance. However, that money is best put to use in a savings account.
And don’t underestimate the power of loose change. Really! Most banks or grocery stores have machines where you can bring your loose change and receive cash or vouchers towards your purchases. Throwing your day’s loose change into a bowl or container every night will add up quickly!
While there are literally hundreds of strategies for saving money on a daily, weekly, monthly, and annual basis, it’s all for nothing if you don’t have a budget in place.