The Best Ways To Save MoneyHere are some of the more successful money-saving strategies you can start with:
1. Keep Yourself Free From DebtIn general, it is a good practice to avoid debt and to stay out of it. It is costly, stressful and can turn your financial situation upside down. Some debts though can be practical such as a home mortgage because the object of the debt appreciates in value and it can offer tax benefits to the borrower. However, if you do not manage your debts well, you can end up with an awful credit score, lawsuits, and possibly even go bankrupt. Amazingly, some simple strategies do work and can keep you out of debt.
Pay off Your Balances MonthlyWhen it has become unavoidable to use your credit card, pay it off the soonest time you can. Credit card companies are notorious for charging high interests, financing fees, penalties and other charges that can really cause your debt to pile up. Allowing the balance to stay for some months would be enough for it to grow and you may find yourself unable to pay it all in full, looking around for personal loans and other ways to consolidate your debt. This is a situation we would like to avoid. One way to avoid credit card debt is to set aside money from your account before you use the card. As soon as the billing statement comes in, use the reserve money to pay your balance in full. Better yet, prepay what you will charge on your card.
Forget Credit Cards – Consider Debit Cards InsteadA debit card is directly tied to your bank account and accesses the account each time you use it. This means if you don’t have money in your account, you won’t be able to use the card, unlike a credit card where the bank lends you money when you use it. Normally, the bank will not extend credit nor allow and overdrawing. This is good news because you can’t go into debt by using your debit card: you only spend for something when you have the money for it. Just be aware of any automatic overdraft program that the bank may attach to your card. You might unknowingly overuse it and end up with debts from your bank.
Consider Credit CounselingDon’t be ashamed to seek help from a trained credit counselor. Most people will not be able to avoid debt using traditional methods and a counselor can help them in many ways. A good counselor can help you go down to the root of the problem and help you set practical strategies and lifestyle changes to address those causes. Proactively, talking through with a counselor before your problem becomes complicated can help you prepare well. Understanding the reasons why people become too deep in debt and its consequences can help you avoid problems later. A counselor can also be an accountability partner who can keep your card spending in check.
2. Save AutomaticallyYou can request your bank to have an automatic savings system for your account. This will involve immediately transferring a predetermined amount from your checking to savings account immediately after they credit your pay.
The logic behind this is that you won’t miss what you didn’t see in the first place.It will help you subconsciously work your budget around the money left after the transfer has been made. Having some money aside means that you have a source of funds for emergencies, home repairs or purchases, school tuition, or even to build your nest egg for retirement. Almost all banking institutions will have this kind of service for their customers so they can easily transfer funds to your savings account automatically.
Pay Yourself FirstWhen you do this, you are employing a good strategy of paying yourself first.
It means that you designate a specific amount out of your paycheck as your personal money (as distinguished from the money that will go to your family budget). You then pay that money to yourself before you pay your bills or anybody else. This can be any amount that you decide – $25, $50, $100 or maybe a certain percentage of your paycheck.The important thing is that you take care of this before anything else. Most people pay off their bills first then spend for other expenses and save whatever is left – if there is anything left over. For a majority of Americans, that method doesn’t work for the simple fact that nothing is ever left after all the expenses. Having this mindset will help you save money because by then, paying yourself first has become your first financial priority. This will give you the discipline with your money because even if your budget is a little tight, you will learn to make adjustments elsewhere while your savings remain intact and continue to grow.
3. Set and Stick to Your BudgetAfter carefully studying your spending habits and patterns, you should now create a reasonable budget. As long as you have a clear picture of your monthly spendable income after savings, you can prepare a more practical budget that you can easily follow.
The important thing is to have something that you can actually execute because if not, it will just lead to frustration. If you can fit it in, include in your budget an amount for future expenses or purchases. If you have a long-range vision of your financial goals, you become more motivated to effectively manage and control your daily budget.
How to Budget?Our guess is, you are not doing a budget because you think it’s hard and you don’t know where to start. The truth is, making a budget isn’t rocket science. You can make a simple one by following these simple processes:
Calculate how much money you take home each monthThis should be easy because, for most employees, the amount is the same (or almost the same), from month-to-month. As much as possible, do not include extraordinary receipts that you may receive from time to time such as overtime, tax-refunds or discretionary bonuses.
Compute how much you spend each month –You can identify some fixed and regular expenses such as rent, membership dues, etc. because they do not vary at all every month. Other expenses, such as groceries and gasoline, would change from month-to-month. For this kind of expenses, you can take an average figure for purposes of budgeting. If you have debts to pay, include the monthly payments as well.
Allot money for occasional expenses –Some expenses only come up once in a while such as a visit to the dentist. Figure out how much this adds up annually then divide it by 12 to get the monthly amount. After this, set aside the amount each month so you can have the money when these expenses eventually come up.
Monitor your spending and your budget –You can go old school and write down your expenses daily, weekly or monthly on a notebook. Or, you can use modern tools such as a spreadsheet to make your life easier and retain your records for a long, long time. You can also use some free tools such as Mint or Mvelopes or paid apps like You Need A Budget (YNAB) to keep track of your spending in a more organized manner.
Adjust your plan as you go along –Unless you’re a financial wizard, chances are, you won’t get your budget figures right the first time. As you religiously track your spending, you may need to shift some dollars to categories where you tend to exceed your budget from items where you may have provided more than necessary. Over time, you can perfect your budget to one that practically works to fit your needs and goals. Let’s say you’ve already prepared a budget but just can’t seem to stick to it – the problem may not be the budget but the method. Many people find that the envelope system works for them. In this method, you physically set aside the money for each item in a separately-marked envelope and draw from them as the need arises. It’s quite impossible to overspend if you follow it strictly because when the money in the envelope is gone, you don’t have money to spend any more.
4. Cut Down on (or Eliminate) ExpensesBe as deliberately meticulous as you can when you look for areas where you can save money. This means checking every bill and item on your expense journal. You heard that right: every one of them!
Why?You will have to look for ways to reduce (or perhaps get rid of) expenses by exploring less expensive options for your current choices. Do this exercise just to see the benefit. Take the difference between your current expense on an item and a cheaper (but equally good) alternative – it could just be around $22 dollars a month or lesser. Multiply that amount by 12 or the number of months in a year. That’s $264 in a year! If you do that to other expensive items, you’ll surprise yourself to find how much all of these seemingly insignificant items will add together in a year.
Prioritize Your PreferencesNow, before you start thinking that you should go and rummage through supermarket bins in your area, that’s not what we mean here. And anyway, we don’t think that the supermarket manager will let you do that. What we are saying is, there are plenty of ways you can cut down on your expenses, enough to let you have more of your monthly income left to save, use and enjoy:
- Shop smart, buy wholesale if practicable
- Buy in cash, don’t buy using credit
- Cut out on that fancy coffee you drive-thru on the way to work
- Look for the cheaper gas and electricity providers
- Shop in thrift stores
- Buy unbranded products (brand names are expensive)
- Revisit your insurance and your monthly premium
- Brown bag at work
- Review your internet bill – maybe you can survive with a lower plan
- Maximize deals
- Change your phone subscription to a cheaper provider or plan
- Use LED bulbs at home, install ones with timers for exterior lights
- Rationalize your dining out