Having some money put aside for savings is one of the most important things you can do if you want to achieve true financial freedom. Living from one paycheck to the next might be great at first, but it also means that when something goes wrong in your life, or you decide you want to make a big purchase, you have to hope that someone will be willing to give you a loan.
A well-chosen money saving strategy can help to get you back on track with your cash. However, for many people, the toughest part about saving cash, is just figuring out how to get started. Here are some quick tips that you can use if you’re starting your new saving strategy from scratch.
1. Start Recording your Expenses
The first step to saving more money is figuring out how much you spend each month, and where you’re spending your cash. Tracking your expenses might not seem like much fun, but it will give you an insight into where your wages are going. Make sure that you’re completely honest with yourself about your expenses too – that means tracking every coffee and candy bar that you buy, as well as major expenses.
Once you’ve recorded your costs for a couple of months, sit down and figure out where some of your biggest problem areas are. For instance, if you’re constantly buying snacks when you’re out at work, it might be a good idea to start taking food with you to the office.
2. Set Savings Goals
Once you’re in a position where you understand how much money you have coming in, and how much you’re spending each month, you’ll be able to start building some realistic goals for what you’d like to accomplish in the future. Having goals is one of the best ways to make sure that you actually stick to your new budgeting habit, as your targets will keep you motivated when things get difficult.
Ask yourself what you’d like to accomplish financially in the next 3, 6, 12, and 24 months. You can even look a little longer-term if you want to as well. Just remember that the amount of money you can save and the goals you’re aiming for might change in the next couple of years.
3. Be Realistic about Cutting your Spending
If you want to find extra money for saving, then you’re going to need to cut your expenses elsewhere. This could mean that you start to cut down on the morning coffee that you buy on the way to work, or that you reduce the amount you spend on your streaming subscriptions. The important thing to keep in mind when you’re looking for opportunities to cut costs is that it becomes incredibly difficult to stick to a budget when you’re too harsh with yourself.
While you will need to compromise on some luxuries, getting rid of everything you enjoy from your routine won’t work. With that in mind, look for ways to be reasonable with yourself. For instance, can you have a coffee twice a week, instead of every day?
4. Stop Automatically Paying
While sometimes it pays to set up automatic payments for the things that you need to deal with every month, other times, automatic payments can end up costing you a lot more in the long-term. For the payments that don’t change, like your mortgage fees, or payments on loans you’ve taken out, direct debits are fine. For things like broadband bills or car insurance, forget the automatic renewal.
Make a point of checking whether you’re getting the best deal on your services once every six months, and don’t renew until you know that you’re joining forces with the right company again. This will stop you from spending more cash for convenience alone.
5. Give Yourself a Break
Finally, remember that starting a new habit, like saving money instead of always spending it – isn’t going to be easy. There will be times during your new saving strategy when you’re tempted to splash your cash, or you make a purchase that you regret later. However, that doesn’t necessarily mean that you should give up on your savings goals completely. Remind yourself that everyone makes mistakes at times. As long as you take your bad spending decision as an opportunity to learn and grow – then you’re still moving in the right direction. Pick yourself up and ask yourself how you can avoid making the same mista