How to Save Money
Learning to save money is one of the most important life lessons that any person can learn. Saving money is the key ingredient to becoming more wealthy, and to getting ahead in life. With that said, learning how to save money is not that easy. For the most part, when many people have money, they are instantly drawn to one of the many things that they want to buy, or the money that they just got has been already destined to buy a certain product or thing. So, there are a number of difficulty challenges that go with saving money, and doing it in a way that can be of impact for your life. We will go over some of these issues below, and as always please comment down below to let us know your thoughts on saving money.
Why do we need to save money?
Let’s start off with some basic understanding of the need to saving money in your life. As you go from being a kid, where most people don’t have a great need for money, into adulthood your needs for have money will change. For most of us, you will need to start spending a lot more on a car, housing, food, relationships, and clothing. Most of these basic items listed above are paid for by our parents as we are growing up. Think about it, your parents drove you around, bought your movie tickets, etc. So as we get older our needs for having money are going to dramatically change in that we not only need money for todays spending, but we will also need it for unforeseen events that may occur. You never know when you will need new tires on your car, have a car break down, have a family member that needs a loan, a need to buy new office clothes, or to simply plan a vacation to get away. Some of these will be major expenditures that will take you saving money in order to make them happen.
Retirement is Something to Consider
If you are lucky enough to have enough money now in your life, and you can buy the essentials plus a little extra, and have some savings then you are in good shape. But unfortunately, having a little extra that you can put away into savings may not just be enough for you to have for retirement. For most people, we won’t have a good retirement package waiting for us when we retire. Some people, especially those who work for multi national companies or the government may be lucky enough to be putting away a pension for their retirement. So, we cannot cover every issue for retirement in this article, but please remember that this is a huge consideration for your life, and something that you should start earlier than later in life. We have an article on compounding and how it can dramatically affect your saving and investing so please check it out. But as you move through life and work on building your savings, it’s important to also have a plan for your retirement. As a general rule you should do the following:
- Inquire about retirement options through your work
- Put away the maximum IRA contribution that you can affort
- Limit paying taxes when possible
- Chose the company with better retirement options when given a choice
Make a Budget
Having a realistic and workable budget is a great way to get control of your spending and finances. This will show you what you are spending money on, and help you to see where you can cut back on spending to save more money. For me, I know that when looking at my budget I can see I spend too much money on Starbucks and this is a great place that I can cut back on both calories and spending…so for me not going to Starbucks is a win/win…LOL.
But the process of making a budget isn’t something to take lightly, it may be a deciding factor in helping you to save more money. Here are a couple of tips for making a budget:
- Do a monthly budget in a spreadsheet program like Excel.
- Update your budget Monthly and review your actual spending with what you planned.
- Review your budgets over time to see how things are going and to see what you’ve been able to save.
- Always have a line for the unexpected. What you want to spend will rarely ever be what you plan to spend. But always know that the more realistic that you are the more successful you will be with your budget…so put in a little buffer for unplanned items.
Earn More to Save More
Those who can save more, have earned more, or have more passive income. So, with this said you will want to look into ways that you can earn more money, to eventually save more money. Right? This hopefully makes sense to you. As you go through your budget and analyze it, you’ll want to think about ways that you can affect it. There are two ways basically to affect a budget and one is to spend less, while the other is to earn more. On this site, Some of our main goals are to help you both earn more, spend less, save more, and invest better. These sound like great ideas and goals right? So as you go through your work and job, be sure that you constantly on the lookout for ways to get ahead at your place of employment. You can do this directly by talking with your boss or the HR department. You can do this by being a great employee and pitching in to help the company grow. Put in your best effort while at work and you will definitely get ahead.
Cut Back your Spending
This is a simple thing to say, to cut your spending, but often hard to implement in practice. As I mentioned above, I enjoy a treat from Starbucks more than I should, and it is essentially a waste of money for me. Often I can eat more cheaply by finding something at home or the market and it will be more economical for me. So, what you’ll need to work on, and it is something that I’ve trained myself to always do, is to think “do I really need to spend on this…is there another way?” If you love a morning cup of coffee, maybe you can avoid Starbucks, and get the free cup served at work. This will save you about $3 per day or up to $600 dollars per year if you went every workday to get your fix of coffee. You see when we think about spending on a very short term basis like it’s only $3, this isn’t really the best way to think about spending. Really to see the impact of spending you need to extend out the time period and you’ll really be shown the true impact. To see that buying Starbucks 200 days a year is really like
Automatic Money Transfers – Tithe to Yourself
If after doing a budget you feel that you can save $100 per month without a negative impact, then setup a auto transfer from your checking account to your savings account or investment account. This way, you can without too much effort or notice start to separate and segregate your savings into different buckets. One good trick to start your investment account or savings account as untouchable money. You don’t want to get into the habit of transferring money into these other accounts, just to go ahead and spend it later on. So, to the best that you can make sure that you forget about any money that is transferred into your savings or investment bucket and leave it untouched.
You can Save on Calories & Money at the Same Time
Eating more healthy and eating at home can often times be cheaper than buying processed foods or eating out. By eating at home most of the time and eating freshly cooked foods you will be more health, eat fewer calories and save money. Test this out at your local market. Here is the test:
- Go through the market and buy what you usually buy.
- Analyze what you bought when you got home.
- Take a highlighter and mark all items that represent worthless calories or non essential items. Items such as sweets, ice cream, chips, soda, candy, bakery items.
- The next time you go to the market, don’t buy any of the highlighted items from your list, as most of us buy similar items when we shop, avoid those non essential items.
- After the second shopping trip, compare the total spent and the numbers of days and amount of food. What my research has shown me is that buy a lot of fresh food that I need to prepare at home saves me money…and I eat more healthy too.
Try out this little exercise and it may or may not help with your spending. It did help with my spending.
Learning How to Save is Never Ending Process
You will find that over time, you will become a person that starts to look at everything as…”Do I really need to spend my hard earned money on this?”. Forgetting the politics of the following comment, let’s take a brief look at the extravagant life of Donald Trump. He loves high end things, he loves gold, and he loves airplanes. When Trump bough his private airplane one of the first things he didn’t was practically line it in Gold.
If you look at this plane, it is adorned in gold fixtures, the bathroom has a gold sink, etc. But here’s the part that we need to pay attention too…event though he is a billionaire, he only spent around $25 million to buy the plane and fix it up. This total is far less than the $80 million that a new plane would cost. So you see, that even the wealthy are trained to save money where they can save it. Buying items more cheaply, and analyzing how each purchase can be made more efficiently will train you over time to become a better spending and thus have more more to save. This is how you can learn how to save more.