Saving money seems so simple: Spend less and stash the extra away! But the actuality of saving money is much harder than the theory. It can be a challenge to save up enough money to cover emergencies or pay for your dream house someday. How do you save enough money to fund your retirement dreams some day?
Saving money can be tough if you don’t understand how to develop a lifestyle that is conducive to the principle. The biggest successes in saving money are done through big lifestyle choices.
Setting Up a Lifestyle of Saving
If you are starting from scratch with a new job and a new budget, you are in the perfect position to set up a lifestyle that costs less than you earn. That is the biggest ticket to saving money.
Rent or buy small
When you apply for rent or a mortgage, you will typically be offered options that are far larger than what you need or what you should be spending. Instead of spending as much as you are told you can spend, spend as little as you can and get only what you need. You don’t need five bedrooms when two will do – and you could be saving thousands per month.
Choose older and dependable cars
New cars are pretty, and they smell nice, but they aren’t good for savings. Instead of buying brand new cars for commuting, opt for a very inexpensive car that is five or six years old, gets great gas mileage, and that you might be able to pay for in cash rather than take out a loan. Then you’ll never have a car payment, you’ll save money on car insurance, and you’ll have less fuel expense every month.
Use short term loans
Can’t afford to pay cash just yet? Stick with the older and dependable car but take out as short a loan as you can. Credit not too hot? There are bad credit loan options that can help you with basic, reliable transportation. Then you’ll have the car paid off in two or three years instead of five to seven and there will still be years of life left in it.
Skip the big optional expenses
There are so many amazing things you can buy to enhance your lifestyle. You can finance new furniture for every room in the house. You can buy a boat for less than $200 per month! And what about that motorcycle you’ve always wanted?
Committing to a decade of payments for something completely optional is not the way to save money. Even if the loan payment is “only” $200 per month, how much is storage? Insurance? Rent a boat or a cycle for the few times you’ll take it out – or better yet – just make friends with someone who already has one.
Avoid and pay off debt
If you already have debt from credit cards or student loans, pay it off as quickly as possible and avoid taking on any additional debt. Keeping your lifestyle as inexpensive as possible should help free up cash to pay down your debts quickly. Once you’re debt free, work hard to save your money and pay cash for future big-ticket items, or be sure you’re able to pay the entire balance every month on your credit cards to avoid falling back into debt in the future.
Avoid Excess in Your Daily Life
We live in a consumer-driven economy. The more we spend, the healthier our economy. This means that we are always being pressured to buy more or spend more or upgrade for more – it’s only a little bit more each month! These upgrades add up quickly and can hurt your ability to save money. So make it a habit to avoid excess in your daily life.
Eliminate unnecessary media
How many streaming services do you have right now? How many do you watch or listen to? Most of us have many different sources of media and they all seem so economical – just $10 or $15 per month! But add that up across multiple areas and you might be paying hundreds.
Keep the music and television service you use the most and cut the rest. If you need to watch the latest season of a favorite show, just subscribe for a month, and then cancel again. You don’t need to pay for the eleven other months of the year to not watch anything.
Cancel subscription services
Are you signed up for monthly razors or gift boxes? Does your dog get mail every month from a subscription service? What about a gym membership that doesn’t ever get used? If that’s the case, it’s time to do a subscription purge. Cancel everything you don’t need, and chances are – it’s everything.
Shop around for the lowest rates
How much are you paying for car insurance? Homeowner’s insurance? Electricity? Mobile phone service? If you don’t know, you probably need to find out. Then you need to see what’s out there that might save you money. If you aren’t checking regularly for savings with your current company and its competition, you’re likely paying more than you need to.
Make Saving Simple
Once you’ve started saving money in your daily life and in your biggest budgeted items, it’s time to get that extra cash stored away where it can grow and help you for emergencies now and in the future.
Save in multiple places
As tempting as it is to dump all your savings in one spot, it’s best to save in multiple places for multiple purposes. Many banks will allow you set up multiple bank accounts for this purpose. One account should house your emergency spending money that you might need at a moment’s notice.
Another account should be the money you’re saving for short-term goals like a big vacation or future Christmas presents. (You might have many of these accounts for multiple goals). Your final savings should be earmarked for long-term goals and long-term emergency savings, like losing your job unexpectedly. You should have three to six months of income saved in this account.
Let your job help you save
If you have retirement benefits at your workplace, be sure you’re using them to their full potential. If you have a company match percentage with your retirement account, be sure you’re saving at least as much as the company will match. If they match up to 5%, set aside 5%. Then your 5% and the company’s 5% will be saving 10% of your income for retirement. Look for other savings or financial benefits like tuition reimbursement, matching savings for healthcare or childcare expenses.
Set up automatic transfers in your bank accounts so that your paycheque comes in and savings automatically flow out again. Setting up savings to happen without any extra work on your part makes it simple to stash money away.