Sometimes the hardest part of saving money is getting started. This guide on how to save money can help you step by step to develop a simple and realistic strategy so that you can save for all your short and long term savings goals.
1.Record your expenses
The first step to start saving money is to determine how much you spend. Track all your expenses; That means every cup of coffee, household item, and cash tip.
Once you have the information, organize the numbers by category, like gas, grocery shopping, and mortgage, and get the total for each. Use your credit card and bank statements to make sure everything is correct, and that you didn’t forget anything.
Tip: Get a free expense monitor to help you get started. Choosing a digital program or an app can help automate part of this task. Bank of America customers can use the Expense and Budget tool, which automatically categorizes their transactions to make their budget easier, in the mobile app or online.
2. Make a budget for savings
Once you have an idea of how much you spend in a month, you can start to organize the expenses you have registered and establish a budget with which you can live. Your budget should give you an idea of how your expenses compare to your income, so you can plan your expenses and limit overspending. Be sure to take into account expenses that occur regularly, but not every month, like car maintenance.
Tip: Include a savings category, and try to save 10 to 15 per cent of your income.
3. Find ways to cut your spending
Find ways to cut your spending
If your expenses are so high that you can’t save as you would like, it may be time to cut expenses. Identify nonessential categories where you can spend less, like entertainment and eating out. Look for ways to save on your monthly fixed expenses like television and cell phone expenses, too.
Here are some ideas to cut everyday expenses:
Use resources such as community event listings to find free or low-cost events to reduce entertainment expenses
Cancel unused subscriptions and memberships, especially auto-renewal ones
Aim to eat out just once a month and go to places that fall under the category of “cheap meals”
Give yourself “time to reflect”: When you are tempted to make a nonessential purchase, wait a few days. You’ll be glad you didn’t, or you’re ready to save up to do it
4. set savings goals
Start by thinking about what you might want to save for, maybe you’re getting married, planning a vacation, or saving for retirement. Then decide how much money you will need and how long it can take you to save it.
If you are saving for retirement or your children’s education, consider putting that money in an investment account, such as an Individual Retirement Account (IRA) or a 529 plan. Although investments come with risks and can lose money, too They present the opportunity to grow as the market grows and could be convenient if you plan for an event well in advance. See step no. 6 for more details.
Tip: Set a small, achievable, short-term goal for something fun, and big enough that you don’t have cash on hand to pay, like a new smartphone or holiday gifts. Achieving smaller goals, and enjoying the nice reward you’ve saved for, can give you a psychological boost that makes the rewarding feeling of saving more immediate and habit-building
5. make automatic savings
Almost all banks offer automated transfers between their checking and savings accounts. You can choose when, how much, and where to transfer money, and even divide your direct deposit so that a portion of each paycheck goes directly to your savings account.
6. Watch your savings grow
Review your budget and see your progress each month. This will not only help you stick to your personal savings plan, but it will also help you quickly identify and correct any problems. Knowing how to save money can even motivate you to find more ways to save and reach your goals faster.