Do you have a plan for each paycheck you get? Or are you just hoping that it will all work out?
Their are so many ways that you can find money just by looking at your daily, weekly, monthly, and yearly spending habits. If you have never done this I would just start looking at one day at a time for a week and progress from there. It is important to determine what a “need” is vs what a “want” is. There are many things in life that are wants versus actually needs.
In order to save money it is important to pinpoint your weakness(s) many of us have more than one. Is yours buying shoes, clothes, cars, online shopping and the list could go on and on. Find that weakness and every time you feel that impulse ask yourself is this something I actually need? Wait at least 48 hours before buying it. Many times you will realize that you actually don’t “need” that item.
In order to live the life of our dreams later we need to learn delayed gratification. In addition, looking at opportunity costs in every decision that you make. Below are some different ways on how to save money. The more you can pick out the further you will be to living the life of your dreams. Remember buying “stuff” does not bring happiness but having enough money can give you the freedom to do what you want with your life. A good place to start is tracking your spending using excel or something like mint. Both are free!
How to Save Money
- Automate your savings and investments
I believe this is the #1 way to make sure to save your money. By setting up your paychecks to automatically. Whether that is into your 401k at work for example, your savings account, and/or your Roth IRA. You won’t even miss the money once it is gone and your future self will thank you because of the power of compound interest and the rule of 72 will be in your favor. Any time you get a raise you should increase your savings. You won’t even miss the money because it will be taken out before you see your paycheck. You are simply living on what you made before the raise.
- Don’t go shopping for fun/Consolidate your errands
The less you buy the more you will save, we all know that. What can we do about it though? Make a list before you go shopping no matter if it is for groceries or anything else. When making out the list are these things that you truly need. Then when you walk into the store make sure to stick to your list. As a culture we need to get out of the shopping as a hobby or form of entertainment. Try to find other ways to entertain yourself. Go for a walk, bike ride, have a picnic, meet with friends, volunteer, etc.
Try to cut down on shopping for things to no more than once a week and then do it all in one day. Make a list throughout the week and then go and get it all at once. Don’t make 3 trips a week. That waste on fuel, waste your time, and ultimately you will end of buying more “stuff” that you don’t need. Make up a menu list ahead of time for the week and get those items that you need for that week only. What works for us is to have a notepad on the fridge. When we need an item throughout the week we write it down. Then that serves as our list when we go shopping that week. You could use an app to do this as well.
This will help so no food is wasted and will save you stress, time, and money. During the work week you won’t be thinking about what to cook and will limit those times you don’t want to think and just order something. Know what foods are in season and don’t buy the ones that are not in season. Buy in bulk (Sams, Costco). Do your own cooking (homemade pizza, granola, mac and cheese, etc.)
- Stop trying to impress others
You don’t need to keep with the Joneses. Every neighborhood has that family who has the nicest car, house, lawn, decorations. They may be spending more money than you but you will be saving more than them and using compound interests on your side to help you out. Just because they may look like they have it all they are probably swimming in mounds of debt. I am not saying that we can’t buy nice things. I would definetly choose quality items, but not quantity. In addition, really ask yourself will this make me happier? Do I need this? You don’t want to keep buying things that are cheap and don’t last either because that will hurt your pocketbook as well. Quality over quantity.
- Live within your means/clearly defined goals
Know what you can afford. Clearly define your goals in your life and align those with people (ex: spouse) that you live with. For example, is your goal to get rid of all your debts except your mortgage this year, is it to max out your 401k at work, is it to max out both of your Roth IRAs, is it to do multiple of those. Whatever it is you both need to be on the same page. By having clearly defined goals it is much easier to save. Then work backward on how much you need to do per month to reach that goal. Is your goal to retire early, to be financially independent, or to live life on your own terms. If so then we need to save now to have a financial freedom later.
- Take care of what you have/do regular maintenance/do it yourself
By taking care of what you have and by buying items that will last, the more you will save over the long haul with minimal effort. Learn how to do some small maintenance things around your house. This will help prevent something major going wrong and save you a little money.
Examples: change oil in car, keep up with regular maintenance checks on (car, lawnmower, all appliances), clean behind major appliances to improve efficiency and lower risk of it breaking down (washer/dryer, fridge, freezer, furnace), know how to do basic plumbing to fix toilets or sinks instead of calling someone to do a 5 minute job learn to do it yourself. There are plenty of free resources to learn. Youtube is great.
- Wear it out
Many times we don’t need to buy something because we have had it a year and it’s going out of “style”. A lot of the clothes they make now (dri-fit, etc.) will last years. Buy good furniture so it will last a decade or more. Take care of that furniture when you get it too! We don’t need a different pair of shoes for every occasion. A few pairs will do just fine. Drive your car for 10 or more years. Having less stuff can actually make you happier. Less decisions to make, more time to do what is important to you, and much much more!
- Anticipate your needs
This one could save you a lot of money and stress by just doing a little bit of planning ahead. Try your best not to have tunnel vision and look into the future for what you want and need in your life.
Examples: Are you planning on having a kid soon, is your car nearing its last leg, do you want to go to college, do you want to buy a home, etc.
By anticipating those expenses and saving up for those it will prevent you from going into debt in the first place or further into debt. Always be looking at opportunity cost as well. That is why we have an emergency account for the unexpected. It can also be used for the expected times as long as we are not depleting the account. For example, don’t buy a $20,000 car and then realize after that you hardly have anything left in your emergency account for when your furnace breaks down or you get laid off from work. You always want to have a healthy emergency account. Maybe about 6 months of expenses. The number might depend on how secure is your job/paycheck.
- Pay off credit cards
The amount of money that is spent on credit card debt and only making the minimum payments with having high interests rates is astounding! You will save hundreds if not thousands of dollars by paying your credit cards on time and getting rid of all debt. If you have credit card debt there are two methods you can use debt snowball or debt avalanche.
By paying off your credit card every month you can increase your credit score which will help you when you go to buy a home or car by being able to qualify for the lowest interest rate possible. Aim to only use 10% or less of your available credit limit every month.
If you realize a credit card isn’t for you, that’s okay. Cut it up and use a debit card.
- Pay off mortgage
Paying off the mortgage can be a big psychological boost for many people. If you have a low interest rate it might not be the best business move. However, it could be the right move for some psychologically. If you feel you can put more money into investments and earn a couple percent more per year then that would be the wiser move. That would be an example of opportunity costs. Where will my money work the best for me? Example if your mortgage is 4% and you think that you can earn 6% or even 8-10% on average in the stock market then that would be the wiser move. However, if by not having your mortgage paid off gives you a lot of stress. Then paying off the house is better for you.
- Keep an auto log/Learn basic automotive maintenance/Find a trusted mechanic
Keeping an auto log will help you to make sure you stay up to date on all of your required maintenance for your vehicle and to ensure that it will last longer. By learning basic automotive skills will require spending less money for a mechanic to look at it. Learn how to change your own oil, filters, washer fluid. Even being able to change a tire in case you get a flat on the road. Then for those bigger needs make sure you find a trusted mechanic. Ask around to see who other people trust. Call and question several different mechanics to see how long they have been around. If they are not answering your questions, move on. Owning a vehicle is a huge expense and anyway you can cut down on the cost the better.
- Carpool, Walk/bike from home or live closer to work, use Public Transportation
Anyway you can find to drive your vehicle less often the better. By living close to work you can bike or walk. If you happen to live farther away is there anyway you can carpool with someone to work or can you move closer to work to cut down on costs. Even better if you don’t need a car and can use public transportation. Don’t have to spend the constant costs on fuel, maintenance, insurance. Learn more here.
- Check out insurance rates before buying a car/Increase your deductibles
Before buying a car check out how much your insurance is going to cost you. By buying an SUV/Truck/4 wheel drive you will ultimately be paying more in insurance. The vehicle could even be an older vehicle but you will be paying more car insurance each year then it would to be to insure a more efficient car without 4 wheel drive.
Look at all of your deductibles on your insurance policies (auto, health, home) and increase them in order to lower your monthly/yearly premiums. Play the probabilities over the possibilities. Be sure to check different insurance carriers around your area every year or two to make sure you are getting the best price. Look at having the home and auto deductible at $1,000. For life insurance go here.
By being healthy you will lower your healthcare costs, increase your productivity at work, and have less stress. which can avoid over consumption of alcohol/cigarettes when done with work. Cut down on the amount of alcohol you have in a week. You will notice a substantial increase in savings and productivity. It increases your health insurance, life insurance, weekly bills and much much more that will cost you over your lifetime. Keep a positive attitude and get plenty of rest to increase your satisfaction in life too. What did you do for yourself today? Take some time for self-care everyday.
- Get books, magazines, videos from the library
Use your local library instead of buying the same items online or at stores. You can educate yourself on any subject matter or just read for fun from the information at the library. They offer movies their as well instead of paying to see one.
- Cut the cable (use Antenna), Get Netflix/Hulu/Amazon Prime (Only 1)
Save hundreds of dollars every year by going away with cable like so many people are. You can subscribe to netflix, hulu, or amazon prime for a pretty low price and you can get antenna tv for free to get your local channels. Look at alternatives to the traditional dish or directv. For example: Sling, YouTube TV, Playstation Vue, Read books is a great alternative to watching TV and not being so dependent on it.
Take vacations cheaper by doing some or all of the following: relax close to home, go camping, buy airline tickets in advance, be your own travel agent, use travel rewards credit card, go on volunteer vacation for organization, avoid weekends/holidays, only pay in cash (don’t take out a loan). Consider www.homeaway.com or www.airbnb.com.
- Buy it used
Use craigslist, yard sales, amazon and buy things used that you need. Don’t buy things just because it’s on sale though. Buy used cars instead of new because in the first few years they depreciate in value the most. There are so many nice things out there for cheap because every year people always want the most up to date items.
- Make gifts and don’t give as many over holidays. Give services instead
Don’t fall into the consumer mindset of we need to give gifts and money for everything. Your services and company is all people really want and need. Raise your kids so they don’t feel like they always need new toys and more of them. Take that money that you would have used to buy toys and put that money into a 529 plan in your state or a Target Date Fund. This way you are investing in their future. Your future self and your kids will thank you.
Invest in 529 plan through your state directly and not through an advisor/broker. This will help you avoid unnecessary fees they would charge you. They will be just as happy with a few. Then when they get older they will be less apt to want to buy more stuff and new things all the time. This will result in them saving more and avoiding debt that will ultimately make them stressed out.
In order to be successful in saving money you don’t need to do all the items from above. Just start out with a couple and add more as you go. You will really start to see the progress and learn to enjoy life for its simpler things. Then you can spread the word and empower others. Just take baby steps. It doesn’t need to be all done at once, otherwise you will become overwhelmed. Believe that you can do it and then you will do it!