Many people live paycheck to paycheck. It’s estimated that more than half of Americans have less than $1000 dollars in savings. Multiple sources suggest that 20% of a monthly income should be saved.
” Save money and money will save you. “
This is how you can save money easily:
1. Track your spending
The first and obvious thing to do when looking to save money is tracking where you spend it on. Most people don’t know exactly where they spend their money on and tend to forget many purchases they made. When you start tracking your money and divide the expenses into certain categories like “food”, “rent”, “clothes”, etc… you will be able to see what you spend money on and where you could be saving a little bit more.
You can easily set budgets and track your everyday spending by using an app:
- iSaveMoney: Add your income, set a budget and track your expenses.
- Money Manager: Easy for quickly tracking your everyday spending.
- Spendee: Great for setting monthly budgets and automated expenses. Also easy to track everyday spending.
So now that you have been tracking your expenses, it is a good time to start budgeting. Look at your spending habits and think about where you are spending too much or where you could be saving more.
Set realistic budgets and tighten them over time. First, try to cut the spendings that don’t really make a difference for you. Think about the impulse purchases and meaningless things you spend money on.
Keep tracking your expenses and review whether or not you have been able to stay within your budget.
3. The first you should pay is yourself
When that paycheck comes in, it’s a good practice to immediately transfer a certain amount to your savings account. You can even make this process automatic.
Think about paying yourself first. Many people first pay their bills and do their shopping. Whatever is left gets saved. And that is often close to nothing.
When you pay yourself first, especially if you make the transfer automatic, you will never see the money and it will feel like you earn less. This means the month starts with a smaller budget and therefore you will behave according to your budget.
Photo by Sharon McCutcheon on Unsplash
4. Eliminate impulse buying
Impulse buying is something we all do but often regret. Online marketers like to set timers on promotions and payment methods are getting easier and faster.
Ever heard of FOMO? FOMO means “Fear Of Missing Out”. This is a psychological effect humans tend be vulnerable to. When we see an opportunity, something on sale with a limited time offer, for example, we tend to be afraid to miss out on the opportunity. This psychological effect is something savvy salespeople like to take advantage of.
Some examples of FOMO used by marketers are:
- Showing how many people are currently looking at the same offer (online)
- Show stock levels (often low stock levels)
- Limited time offers (a sale will end within 20min, for example)
- Limited free shipping
So how can you avoid falling for these traps?
The 30-day rule
The 30-day rule is a method to avoid impulse purchases, often used by minimalists.
When you have something on your mind that you want, simply write it down and don’t purchase it before 30 days have passed. You might notice that in many cases you will have forgotten about the thing you wanted, or that you simply don’t want it anymore at all.
5. Maintain your lifestyle
Going through the stages of life means going through different financial situations. As we get older, our income often inclines. This is due to us getting better jobs, promotions or extra income streams.
Sadly this advantage is regularly offset by us getting ourselves into expensive habits. Now that we got that promotion or that new job, we feel like we deserve to upgrade our car, buy a bigger house, or wear more expensive clothes.
Avoiding this could make saving over time much easier and make your wealth grow faster.
6. BONUS TIP
Go through your bills. Look at your utilities, insurances, loans, and mortgages. Often there are cheaper options, lower-cost service providers and you might be able to get lower interest costs when you revise your loans.
Look at where you can change providers or get a cheaper plan. This will drastically lower your bills while the services you get remain the same.
If you would like to learn more about this topic, here are 5 books to consider:
- The 9 steps to financial freedom ~ Suze Orman
- The total money makeover ~ Dave Ramsey
- Rich Dad Poor Dad ~ Robert T. Kiyosaki
- Think and grow rich ~ Napoleon Hill
- Broke Millenial ~ Erin Lowry
Photo by Micheile Henderson on Unsplash
*DISCLAIMER: The content on this website is made in good faith and I believe it is accurate. However, this content should be considered informational and not for making financial decisions.