When it comes to saving money, there is no one big secret. There are few habits one must adopt in order to regularly set money on the side.
This article aims to go through those habits to help you save (and invest) more. And this applies to just about anyone, no matter how much (or little) they earn…
1. Goals
You *must* determine how much you want to save and for what. Do you want to pay off your mortgage? Buy a new car? Move to a better place? Save more for retirement?
Whatever it is, you’ll want to come up with the number. And then work towards it.
It doesn’t have to be complicated, though. Say you want to save $12,000 per year, that means you should put aside $1,000 every single month.
Or you want to put $6,000 into your 401k account every year — you should come up with $500 on a monthly basis. See where this is going?
Once you come up with the number, divide it by the number of years, and then by the number of months. And make sure to follow through.
It’s not easy, but if you want to save — it is a step you’ll want to take.
2. Automated savings
The easiest way to keep your savings on track is to automate them. With automation in place, a certain amount of money will be deposited to a specific account — or invested in some fund — without you ever looking at it.
By taking this route, you will avoid temptations and live with the rest of the money. At first, you may have to squeeze a bit, but later you’ll get used to it.
There are many modern, mobile-enabled services, that could do this for you, and allow just about anyone to put some money on the side. Or make investments for as low as $5 per week (or $1 per day).
You don’t have to be super-rich to get started; you just have to automate these investments or savings, and set them in such a way that as soon as you get your paycheck, a certain portion — no matter how small it is — gets routed for specific (money saving) purposes.
3. Differentiate between needs and wants
There are certain things all of us need, including food, water, electricity and internet access; and then there are those we would like to have — but can perfectly live without them.
Good savers differentiate between the two and don’t go on shopping sprees every single month. Or even every quarter.
Sales and special deals can be tempting and it’s up to you — if you want to save — to avoid buying things you don’t need. Or will seldom use.
We are talking about things like cable TV, gym membership, new clothing, various subscriptions, and so on.
Many of these purchases make perfect sense but… How much time you have to watch cable TV? Do you regularly visit the gym? And that new clothing — is it really a must have?
A few things to think about.
4. Live below your means
We didn’t say WITHIN but BELOW. That’s an important difference.
Most American live above their means and we have cheap credit to “thank” for that. However, that credit comes with a hefty price tag.
So first, you should live WITHIN your means, only to move to the second step, which is living BELOW your means. This way, you will be able to save much more every single month, and have a special fund to kick in when emergency strikes.
You will have to give up some things like dining out every now and then, but with your GOAL in mind — you’ll agree that it is all worth the effort.
5. Don’t waste money
For start, think about all the food that goes to the trash bin every week. All of us are doing it, and that gotta stop.
You — all of us — should think more about it and only buy the food we are going to eat. There are millions of people all around the world who don’t have what to eat, and we Americans through things left and right.
And it’s not just food. We buy new stuff — especially clothing — whenever we “feel like it.” But do we really need that extra pair of jeans, or a new shirt? Most of us already have closets full of stuff we seldom, if ever, wear.
Budgeting is crucial to stop wasting money. Put a budget on every product/service category per month, quarter and year, and stick to it. Say you don’t want to spend more than $1,000 on clothing per year or $150 on dining out per month.
List all of the different expenses and purchases you made last year, categorize them and put a number next to each category. And, again, stick to it.
Also read: 12 Things Americans Waste Their Money On
6. Go for the deals
But beware, retailers want you to spend more than you have planned…
First determine the NEED, and then find the DEAL. Shop around, use mobile apps, coupons and other modern tools to get the best possible price on the product or service you are looking for.
Google is your friend here and so are the comparison shopping services. Use both of them to find the best possible deal or coupon.
Search for “PRODUCT/SERVICE_NAME coupon” and see what comes up. Or something more straightforward like “where can I get the best deal for PRODUCT/SERVICE_NAME?” You can always buy what you need for the list price, but putting in half an hour of your time into researching could save you a lot of money. So yes, it’s worth the effort.
7. Know when to say no
This is related to the previous point — no matter how the deal is good, if you don’t need the product or service it is tied to, don’t go for it. Even if it’s one of those “one in a lifetime offers” — and they are typically get repeated from time to time — say NO.
The idea is that you have your OWN agenda, the bold GOAL you are striving to. You will be tempted many times as you are trying to reach that goal, and will have to learn to say “no” along the way.
Somewhat related, you will want to say “no” to the stupid “Keeping up with the Joneses” game. So what if everyone else is doing it (spending money on some new gizmo) — you are not everyone else!
Which leads us to…
8. What other people think is irrelevant
Back to your GOAL and temptations that will be spread across the road to savings. People will wonder why you have suddenly changed your (spending) habits. If you have to – explain them your goal. Some of them will have something “smart” to say — there are always such people who “couldn’t imagine living without A or B” — but guess what… You DON’T CARE what they think, say or do. You have an agenda of your own, and you want to stick to it.
This doesn’t mean you should avoid seeing other people; it’s just that you will change some things, and if someone notices the change, you’ll explain yourself. This is a financial matter and has little to do with friendship(s). The bold GOAL you have set for yourself (and your family) should be the light that guides you through all those somewhat weird situations.
Your real friends will understand, and perhaps even ask you for advice how they can take the similar road. Feel free to send them this article. 😉
9. Track your spending
Last but not the least…
Do you know how much money you spend every month? How about how much did you save?
Good savers know their numbers and you should know them too. Look for those bank listings and/or use some mobile app to keep up with the money flow.
From there — by getting the complete picture — you will be able to determine where you can make additional cuts. So you can save even more.
When it comes to money, “if you can’t measure it – you can’t manage it.” Know the figures, so you could manage them properly.
Conclusion
Adopting these habits isn’t easy, but as we said it a number of times — it is worth the effort. Start with the goal, and steadily build from there. After some time, these habits will become part of your being, and you will have hard time imagining the time when you were different.