We all could use a little more financial flexibility, right?
Follow these steps to create a savings plan that fits your lifestyle in order to make saving easier and a lot more enjoyable.
Sometimes the hardest thing about saving money is just getting started.
This step-by-step guide 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
To begin saving money, the first thing you need to do is to figure out how much you spend on a monthly basis.
Make a list of all your expenses, from coffee to household items and cash tips, as well as regular monthly bills.
You can use your credit card and bank statements to make sure you have included everything. Once you have your data, organize it by categories, such as gas, groceries, and household expenses.
Budget for saving
As soon as you know what you spend in a month, you can begin to create a budget showing your expenses in relation to your income, so that you can plan your spending and limit overspending.
Make sure to include irregular expenses, such as car maintenance, in your budget. Include a savings category and start saving an amount that feels comfortable to you.
Be sure to add a line that says “savings” and make that a permanent part of your new budget.
Find ways to cut spending
Spending less might be the best way to save more if you aren’t able to save as much as you would like.
Reduce your spending on nonessential items, such as entertainment and dining out. You should also consider ways to reduce your fixed monthly expenses, such as your car insurance or cell phone plan, as well.
It will be hard at first, but all good things in life are that way.
Set some goals
The first step towards saving money begins with setting a goal. Think of both short-term and long-term goals that you might want to save for, and then estimate how much money you will need and how long it might take you to save it.
Short-term goals include an emergency fund (three to nine months of living expenses), a vacation, or a down payment on a vehicle
One of the most common long-term goals is a down payment on a home or remodeling project, the education of your child, or retirement planning
Prioritize your finances
Your savings allocation is most likely to be influenced by your goals, following your expenses and income.
In the event that you will need to replace your car in the near future, you may want to begin saving money for it now.
Use the right tools for the job
If you’re saving for short-term goals use a regular bank savings account.
A high-yield savings account normally offers a higher interest rate than a regular savings account
In order to achieve long-term goals, consider investing in securities such as stocks or mutual funds.
Note, however, that these investment products are subject to investment risks, together with the possibility of the loss of the money invested.
Pay off debts
The debt you accumulate over months or years cannot be paid off overnight.
For this reason, I only use my credit card when I can complete the payment by the end of the month.
Meanwhile, you can compare credit cards to find a card that offers better interest rates and may be able to transfer your existing balance without incurring additional fees.
Cash is king
If you spend cash instead of a debit card, you’ll be more likely to plan your purchases better, stop impulse buying, and save the change you get.
You’ll be amazed at how much you accumulate in just a few months by limited spending to what you actually have, not how much you can borrow.