Saving money can be easy when you find the method that fits your life. In this article, you will learn some simple and effective tips for saving money that can help you start achieving your savings goals.
Creating a Budget
The first step to saving money is understanding where your money goes each month. “You can’t start saving money effectively until you have a well-defined monthly budget,” said Chris Panteli, a financial writer, in an email interview with The Balance. The budget gives you control over your finances. The trick is to find the right budget for you.
Treat Savings Like a Bill
After setting a budget, a guaranteed way to save money is to treat savings like a bill, said financial expert Sophia Jones in an email interview with The Balance. “When you get your paycheck, take the amount designated for savings first and put it somewhere else, perhaps in a high-yield savings account. By doing this, you train yourself to save regularly and practice living within your means while preserving your savings,” Jones said.
Calculate Purchases in Hours of Work Instead of Cost
Thinking like a saver means considering the real cost of the things you buy and how many hours you will need to work to afford them. Start by taking the price of the item and dividing it by your hourly wage.
Example: If you want to buy a shirt for $48 and earn $12 per hour, ask yourself if buying it is worth the four hours you will have to work to pay for it.
The 24-Hour Rule
This simple and effective trick helps in saving money. When you see something you think you need or want, don’t buy it immediately. Instead, implement the “24-hour rule.” You may end up buying it or you may not. But at least you can give yourself more time to think it over.
You can apply the 24-hour rule when shopping online by removing your credit or debit card from your browser or smartphone. Sometimes, just putting barriers between you and the “buy” button can reduce impulsive purchases.
Set Up Savings Automatically
“Habits work best when they happen in the background,” said Kristen Anderson, CEO of Catch, in an email interview with The Balance. By using smart default settings like directing a portion of your paycheck to a separate savings account, you will be able to achieve your savings goals in no time.
Start Small
Anything is achievable when done gradually. Corey Noyes, a financial advisor at Balanced Capital, said, “Many people stretch themselves unreasonably when trying to start saving.” This can lead to frustration and ultimately give up on your savings goals. The key is to “choose a manageable amount that doesn’t stress you out and set it to auto mode,” Noyes said.
Budget Your Savings Using Cash Envelopes
According to a study by the Sloan School of Management in 2021, people spend more money when using a credit card instead of cash. However, if your spending habits are preventing you from saving money, you might try using the cash envelope budgeting method. After creating your monthly budget, use cash to separate savings and all your other expenses into envelopes. Once the envelopes run out, you’re done for the month, and your savings remain intact.
Open a “Save the Change” Account
A “Save the Change” account works by automatically helping you save the remainder of your money after making a purchase. The account rounds up each purchase made with a debit card to the nearest dollar and then deposits the difference into your savings account. Of course, to achieve significant savings goals, you will need regular budgeting, but you may be surprised by how quickly small amounts of money accumulate.
Take Advantage
From Company Matching
Many companies offer employee incentives by matching a certain percentage of the money you save in retirement plans like your 401(k). This means that for every dollar you save, you’ll get an extra dollar, which is the match. So, if you’re not taking advantage of your employer’s match, you’re leaving free money on the table.
Act Like the Extra Money Doesn’t Exist
When you need an easy way to save money, you should set the extra money aside and act like it doesn’t exist. Whether the money comes from a work bonus, bingo winnings, or a tax refund, add it to your savings and behave as if it’s not there.
Shop on Wednesdays
Why is Wednesday special? “When most grocery stores start their new sales on Wednesdays, customers usually get an early chance at the latest deals and specials,” said financial expert Steve Wilson in an email interview with The Balance. “Additionally, stores sometimes accept coupons from the previous week,” Wilson added.
Commit to Dining Out One Less Day a Week
If you enjoy dining out, you don’t have to give it up completely. Instead, pledge to cut back. For instance, if you spend at least $15 daily eating out five days a week, that quickly adds up to $300 a month. However, if you reduce it by one day a week, you’ve just found $60 a month to add to your savings.
Conclusion
There are many benefits to saving money, and the reasons for saving vary from person to person. Although setting aside money can be a hard habit to start, the trick is finding some savings methods that work for you and your lifestyle.
Frequently Asked Questions
Why is it important to save money?
Saving money is not just important, it’s essential. Your savings can give you peace of mind by helping you avoid resorting to credit cards or accumulating debt when unexpected expenses arise. Saving money can also allow you to achieve your financial and personal goals, such as buying a home. Additionally, saving money can help grow your funds through the power of compound interest.
How much should I save every month?
The popular 50/30/20 budgeting method recommends using 20% of your income as a guideline for savings. Initially, you can allocate this amount to an emergency fund until you have saved three to six months’ worth of expenses. After that, you can start putting money toward other financial goals.
How much should I save to buy a home?
When preparing to buy a home, it’s good to save about 25% of the purchase price in cash to cover a down payment and closing costs and moving expenses. For example, if you buy a property worth $300,000, you may end up paying over $75,000 to cover the down payment and all the various closing costs. However, if you’re a first-time buyer, you can purchase a home with a down payment of 3.5% of the home’s value.
Source: https://www.thebalancemoney.com/an-introduction-to-saving-money-1289942
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