Sometimes the hardest thing about saving money is just getting started. It can be difficult to figure out simple ways to save money and how to use your savings to pursue your financial goals. But you CAN do it! WHAT ARE YOU WAITING FOR?
Record your expenses
The first step to saving money is to figure out how much you spend. Keep track of all your expenses—that means every coffee, newspaper and snack you buy. (which you SHOULDN’T be buying anyway!) Ideally, you can account for every penny. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Consider using your credit card or bank statements to help you with this. If you bank online, you may be able to filter your statements to easily break down your spending. I recommend Quicken, Mint.com, or Personalcapital.com. These are GREAT resources for tracking and categorizing your spending! NO EXCUSES!
Make a budget
Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income—SO YOU CAN PLAN YOUR SPENDING ACCORDINGLY! In addition to your monthly expenses, be sure to factor in expenses that occur regularly but not every month, such as car maintenance.
Plan on saving money
Now that you’ve made a budget, create a savings category within it. Try to put away 10–15 percent of your income as savings. (for HARDORE saving maniacs I recommend 50% or more if you’re goal is EARLY RETIREMENT) If your expenses are so high that you can’t save that much, it might be time to cut back! To do so, identify non-essentials that you can spend less on, such as entertainment and dining out. You only have so many “GEORGES” each week. Why not turn them into “BENJAMINS”? You do know the definition of insanity right?
Tip: Considering savings a regular expense, similar to groceries, is a great way to reinforce good savings habits. I recommend automating your savings/investments! Time to get serious. The clock never stops ticking!
Choose something to save for
One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for—anything from a down payment for a house to a vacation—AND NEVER FORGET YOUR RETIREMENT!! Then figure out how long it might take you to save for it. If you need help figuring out a time frame, try Bank of America’s savings goal calculator.
Here are some examples of short- and long-term goals:
Short-term (1–3 years)
- Emergency fund (3–9 months of living expenses, just in case)
- Down payment for a car
Long-term (4+ years)
- Your child’s education*
- Down payment on a home or a remodeling project
*If you’re saving for retirement or your child’s education, consider putting that money into an investment account such as an IRA or a 529 plan. While investments come with risks and can lose money, they also create the opportunity for compounded returns if you plan for an event far in advance.
Decide on your priorities
After your expenses and income, your goals are likely to have the biggest impact on how you save money. Be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs. Prioritizing goals can give you a clear idea of where to start saving. For example, if you know you’re going to need to replace your car in the near future, you could start putting money away for one. There are many ways to save and never get discouraged. SAVING IS FUN! Watch your totals go up week after week!
Pick the right tools
If you’re saving for short-term goals, consider utimeing these FDIC-insured deposit accounts:
Regular savings account
High-yield savings account, which often has a higher interest rate than a regular savings account
Bank money market savings account, which has a variable interest rate that could increase as your savings grow
Certificate of deposit (CD), which locks in your money at a specific interest rate for a specified time.
For long term goals I recommend opening up a Vanguard IRA. Vanguard index funds are a great way to invest!
Make saving automatic
Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money to, or even split your direct deposit between your checking and savings accounts. Automated transfers are a great way to save money since you don’t have to think about it and it generally reduces the temptation to spend the money instead.
Watch your savings grow
Check your progress every month. Not only will this help you stick to your personal savings plan but it also helps you identify and fix problems quickly. These simple ways to save money may even inspire you to save more and hit your goals faster.
I wish you success in your savings endeavors. Saving is a choice and one we should all make in order to have a comfortable retirement. Thanks for visiting Saving George!
Thanks for reading,