8 easy ways to save money
Saving is easier if you have a plan. Follow these steps to create your own
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Sometimes, the most difficult thing about saving money is to start doing it. This step-by-step guide on how to save money can help you develop a simple and realistic strategy so that you can save for all your short- and long-term goals.
Record your expenses.
The first step to saving money is to determine how much you spend. Keep track of all your expenses—that means every cup of coffee, household item, and cash tip, as well as recurring monthly bills. Record your expenses as easily as you can, with paper and pencil, a simple spreadsheet, or a free online application or expense tracker. Once you have the information, organize the numbers by categories, such as gasoline, supermarket purchases, and mortgage, and get the total of each one. Use your bank and credit card statements to make sure you have included everything.
Include the savings in your budget.
Once you know how much you spend in a month, you can start creating a budget.To plan and limit excessive spending, your budget should show how your expenses correspond to your income.
Consider frequent but non-monthly expenses like car maintenance.
Include a savings category in your budget and start saving a comfortable amount. Plan to increase your savings over time until they represent between 15 and 20 percent of your income.
Find ways to cut your expenses.
If you can’t save as much as you would like, it may be time to cut expenses. Identify categories that are not essential, such as entertainment and eating out, in which you can spend less. In addition, look for ways to save on your fixed monthly expenses, such as your car insurance or your cell phone plan. Here are other ideas to cut daily expenses:
Search for free activities
Use resources, such as community event listings, to find free or low-cost entertainment events.
Review your recurring charges.
Cancel subscriptions and memberships that you don’t use, especially those that automatically renew.
Compare the cost of going out to eat with that of cooking at home.
Plan to eat at home most of the time and look for offers at local restaurants on the nights you want to go out to eat.
Wait before buying.
When you are tempted to make a non-essential purchase, wait a few days. You may realize that the item is something you want but don’t need, and you could establish a savings plan to buy it.
Set savings goals.
One of the best ways to save money is to set a goal. Start by considering short-term (one to three years) and long-term savings goals (four years or more).
How to save?
Decide how much money you need and how long it will take to save
Common short-term goals include an emergency fund (for three to nine months of living expenses), a vacation, or the initial payment for a car.
Common long-term goals include a down payment for a house or a remodeling project, your child’s education, or retirement.
Quick advice
Set a small, achievable, and short-term goal for something fun that is not part of your monthly budget, such as a new smartphone or gifts for the holidays.Achieving minor goals and experiencing the pleasant reward you saved for might offer you a psychological boost that makes saving more rewarding and strengthens the habit.
Set your financial priorities.
After your expenses and income, your goals are likely to have the greatest impact on how you distribute your savings. For example, if you know that you will soon have to change your car, you could start saving money now to do so. What tips on how to save Make sure you keep long-term goals in mind; it is important that planning for retirement does not take a back seat to short-term needs. Knowing how to prioritize your savings goals can give you a clear idea of how to distribute your savings.
Choose the right tools.
You can choose from several short- and long-term savings and investment accounts.
Carefully consider minimum balances, costs, interest rates, hazards, and the period you will need the money to choose the combination that lets you save the most to reach your goals.
Short-term goals
Use FDIC-insured deposit accounts if you need money quickly:
- A savings account
- A certificate of deposit (CD), which keeps your money at a rate usually higher than that of a savings account for a fixed period of time,
Long-term goals
If you are saving for retirement or your child’s education, consider:
- Individual Retirement Accounts (IRI) or 529 plans, which are fiscally efficient savings accounts,
- securities, such as shares or investment funds. These investment products are available through investment accounts with a broker. 1
Save automatically
Almost all banks offer automated transfers between their checking and savings accounts. You may send money when, how much, and where, and even split your direct deposit so part of each paycheque goes to your savings account. The advantage is that you don’t have to think about it, and the probability of spending the money is lower. What tips on how to save Other simple savings tools include credit card and currency rewards programs, which round up transactions to the next dollar and transfer the difference to a savings or investment account.
Watch your savings grow.
Check your budget and see your progress every month. This will not only help you stick to your personal savings plan but also quickly identify and correct any problems. Knowing how to save money can even motivate you to find more ways to save and achieve your goals faster.
