Starting is often the most difficult part. You have to start as soon as you have the money. Having the mentality of wanting to wait until you make more money will only end up with you spending more on things you do not need instead of saving it. Also, waiting for the motivation and the inspiration to save will only delay you from starting.
Know Your Reasons and Goals
The first step in saving is to know your reasons why. This will serve as your driving force or motivation to start saving and continue doing so. Do you want to save for your children’s education? Is it for an item you always wanted? Is it for a new house or a new car? Is it for the trip to Europe, or are you saving for your retirement plan? Are you saving in order to pay off a debt you are struggling to pay for? Or is it for an advance payment for your mortgage?
These questions will then become your goals in saving. It is important that you set realistic savings goals. Aside from giving you a clear reason to save, it will also help you make the necessary decisions and find the right strategy required for you to reach your goals.
Have the Right Mindset
Saving money requires having a way of thinking that you are spending for a purpose. You can do so by reminding yourself continuously of your goals to motivate yourself. Write them down and place it somewhere you can see it often. It might be in your office desk, in your fridge door, or your bedside table. Next is to be confident in your spending and saving habits. If you think there is something wrong with how you manage your finances, change it.
This is also helpful when you are in tough situations where you have to decide on spending your money or not. Always ask yourself the questions of why you are going to purchase the item, its functions in day to day living, and whether its life will be worth the price.
Identify and Track Your Expenses
The next step to becoming a good saver is to identify all of your expenses. This will help you identify your spending categories and how much you spend in each one. Start with figuring out what you spend for your daily needs, such as food and transportation, clothing, and utility fees. These also include your subscriptions, such as your Netflix account and your memberships in gyms or yoga classes, and money you spend on entertainment like watching a movie or going out with friends.
You must be honest in identifying your expenses when you start to save, as this shows where you can cut off extra spending and instead put that money in a savings account. Likewise, it also makes tracking where your money goes easier. Make it a habit to keep all of your receipts in one place, as this serves as references for the prices, and mirror your spending habits to the same amount for each category every month. This will avoid having to question where all of your money went. Record all of this information to easily compare and contrast your monthly expenses to create a plan that will not affect much of your budget while accumulating your savings.
Open a Savings Account
Next is to open a separate account for your savings, preferably in a town the right distance away from where you live. This will ensure that you cannot easily touch your savings when you are tempted.
There are financial institutions that offer online savings account and term deposits where there is no card involved. It removes the possibility of you accessing your savings when you are out with your friends or an item you want goes on sale. It would be great if you automate the process of putting a portion of your paycheck directly to your savings account. Learn to live off what is left of your income after putting a portion for your savings. As they say, you will never miss what you never had.
Create a Sustainable and Realistic Budget Plan
You’ll need to create a budget plan that suits your spending habits and money-saving goals. Start by figuring out your cash flow. Through monitoring your expenses, a budget plan emerges. There are two methods in budgeting: through the traditional ways or through utilizing smartphone applications.
Traditional ways of budgeting include: the envelope method, where you store your budget in cash form inside envelopes labeled with each spending category; the bullet journal method, where you jot down all information such as your financial goals, spending habits, and expenses; and lastly, the 50-30-20 budgeting method, where you divide your cash flow into 50% for needs, 30% for wants and 20% for saving. Thanks to modern technology, you can also budget using applications such as Mint, Wally, You Need a Budget (YNAB), Mvelopes, and PocketGuard. As these are phone applications, they are very convenient to use and not much of a fuss to set up.
Creating a budget plan sets a concrete limit on your spending habits, whether it is for something written on your bucket list or just out of impulse. It is then important that your budget will be able to last you a long time yet still ensure that you live the life you want.
Cut Back on Costs
After creating a budget plan and reviewing your past expenses, you will have a rough draft of all your expenditures and an idea of how you are going to pay for it. the next step will be to cut off figures from spending categories you spend more on, such as your unneeded expenses, utilities, and subscriptions.
Instead, start by doing small things such as carrying your water container instead of buying bottled water, bringing food from home for your snack and your lunch instead of eating out, walking instead of paying for your fare or gas for your car, and unplugging all of your appliances that are not in use. These simple actions could greatly help in your monthly expenses and the environment as well. The money you cut off from all of these could then be added into your savings account.
Know Your Priorities
Remember your goals in saving. This will help in motivating you to stick and know your priorities in life. Focus on spending more on your needs and spend less on your wants.) To save is to know which to prioritize in life.
For example, your water bill is due at the end of the month, and if you fail to pay, there will be additional fees. At the same time, the luxury bag you have always wanted goes on sale. The prices of the two are not far from each other. Before deciding, ask yourself: Which would have a positive effect on your finances? Which of the two can you live without? Which is the necessity? These are only some of the questions you must ask yourself before purchasing and to know which is truly your priority.
Speaking of priorities, when you shop, it is very easy to overspend way beyond the budget allocated. Malls usually put the priority items further back, so you have to pass through other colorful items that could grab your attention. Some tips to become a wise shopper are:
- Make a list: Listing what you need to buy and where you are going to buy them will prevent you from buying anything in the mall that you do not need. This will also help you to remember, thus saving you time, effort, and money.
- Research the price: Watching advertisements, checking online, and checking actual prices in the market will help you compare which are cheaper and which are expensive for their worth.
- Know if they’re upselling: Verify if it is really a good deal or just a sales pitch to buy an item that you do not need. Recognize which are the sales pitches and work hard to resist them.
- Ask for discounts: You will never know if you never try. Do not be shy to ask if it is the best price they offer. A bit of haggling will not hurt. Use discount coupons if you have some and take advantage of deals and sales.
Check Your Progress
The last step to do to become a good money saver is to check your progress. Schedule twice a month to check if you are on the right track of saving. Verify if your budget allows you to have the amount for saving while still giving you the freedom to live the life you want. Another wonder of checking your progress is when you can see how far you have come towards reaching your financial goals in saving and know where you lack good money-saving skills.
- Spend cash you have in your wallet: This will help you in avoiding acquiring unnecessary debts and swiping a credit card. It also sets a rigid limit on yourself, as this reminds you to spend less and not overextend yourself.
- Stock up on items that are not perishable: Buying in bulk the items that you commonly use, such as soap, canned goods, and emergency supplies, for example, will get you a good deal. Just make sure you use it and have the space to store it for the meantime.
- Make your money jar: Tossing your spare change into a jar is also a good thing to do. Schedule a date where you will empty it and transfer to your savings account and watch it grow.
Becoming a good saver is a complex process for some, but if you have the right mindset, the necessary tools, and the knowledge, do not hesitate. Whether it is for long or short-term goals, follow the steps above, and you will be a good saver in no time!