We all want to save money, but most of us are clueless about how to build up proper savings. When you decide to start saving, you may save a bit here and there, missing out on something big because of the lack of a goal or plan. The key is to develop sizable and achievable goals to build up your savings. Most people make the mistake of setting saving goals that are too unrealistic, difficult, or impractical. This is why it’s essential to figure out actionable ways to save and make it a consistent aspect of managing your finances.
Are you ready to develop realistic and straightforward money-saving habits to help you achieve your short-term and long-term goals? Read on for more!
Set Saving Goals
Take a step back and visualize what you are saving for: Is it to buy your dream house in two years with a 20% down payment? Or is it to purchase a brand-new vehicle this year? Setting savings targets with a timeline keeps you more focused on knowing how much you must save each month to achieve your goal.
Record Your Expenses
One key step in saving money is understanding how much you spend. Tracking your expenditures will give you a clearer picture. By expenses, we mean everything – from your monthly bills to your morning coffee. Once you’ve taken stock of how much you spend, you can organize your expenses in a spreadsheet or notebook and categorize them by groceries, mortgage, utilities, entertainment, and so on.
By recording all this, you can identify areas to cut expenses. For example, if you notice that you’re spending too much on takeout meals, you can make a conscious effort to start preparing home-cooked meals to save money.
Include Savings in the Budget
You can start creating a budget once you have a clear picture of your monthly spending. This will help you ensure that your budget aligns with your income, help you plan your expenses, and avoid overspending.
Moreover, you can include a savings category in your budget to set aside however much you can afford to spare after taking care of necessary expenses. Even if you can only save a small amount every month, don’t underestimate the impact it can make over time. The key is to remain consistent and gradually increase your savings by up to 20% of your income.
Eliminate Debt
Debt can chip away at your savings; before you know it, there’ll be none left! If you’re trying to save money while carrying a huge debt load, it only makes sense to focus on getting rid of it first. Many people may not think this is the right approach, but try this: add up how much you spend servicing your debt monthly, and you will see how much more you could be saving if you didn’t have to carry it. When you stop paying interest on your debt monthly, all that money can go into savings.
Make Your Savings Automatic
Nearly all banks offer automated transfers between your checking and savings accounts. You can decide how much, when, and where to transfer the money. You can even split your direct deposits so a chunk of your paycheck immediately goes into your savings account, making you less likely to overspend.
Besides, when you set up an auto transfer from your checking to your savings account each payday, you save money automatically, whether $50 or $500 a month.
Quit Smoking
Forget about smoking being terrible for your health; it’s terrible for your finances, too! If you smoke a pack or two each day, it amounts to thousands of dollars per year. This is money that could easily go into savings if you quit smoking altogether.
Pack Your Lunch
Buying takeout doesn’t seem like a huge expense, but when you look into it, these seemingly small costs can slowly eat into your savings. For example, if you buy a $10 lunch at work over the course of one year, you will be spending about $2,500. On the other hand, preparing lunch from home would cost you less than $5. The extra money you’re spending on takeout lunch – well over $1,000 – could easily be used to create an emergency fund or make a sizeable contribution to a retirement fund.
Opt For a Staycation
We all need to relax once in a while and taking a vacation is the perfect way to decompress, but thousands of dollars in airline tickets can make this difficult. Instead, you can look for vacation spots closer to home – a staycation – to minimize costs and give yourself a change of scenery.
Save on Utility
Utility bills have become quite expensive lately and are expected to increase over time, so it’s wise to take charge now. You can make a significant impact by making small changes around the house. For instance, lowering the thermostat on your water heater by 10 degrees can save 3-5% in energy costs, and installing a tankless water heater can deliver nearly 35% savings compared to the usual storage tank heater.
Spend to Save
Speaking of utility bills, you can make use of further savings – if you’re willing to invest in making your home more energy efficient. A very tactical way of doing this is by weatherizing your home. Contact your utility company and request an energy audit to get an idea of the problem areas in your house. Alternatively, a certified contractor can provide a home energy efficiency review. Improving your home’s energy efficiency could be in the form of improvements like sealing doors and windows or installing new insulation. Or you could invest in solar panels that can help you save thousands of dollars in utility bills over time!
Bottom Line
Saving money doesn’t have to be a complicated matter, nor should it be an unrealistic goal. Bringing healthy saving habits in practice is especially important to secure a solid financial future.
Make sure to review your budget and analyze your progress each month. This will not only motivate you to stick to your savings plan, but it will also help you identify areas where you need to reduce spending. As you build this habit over time, it will inspire you to look into more ways of saving to achieve your goals faster. It’s all about being smart about your choices and working with foresight!
