The general consensus among financial planners is that saving money is always a good idea. Saving even small amounts of money on a regular basis can add up to a significant amount over time. Your savings can help you pay for a vacation, a new car — and is especially necessary for retirement.
Saving money can provide financial security and peace of mind. In the event of an unexpected expense or emergency, having savings will help you weather the storm without going into debt.
On top of that, saving money can build wealth over time. It‘s important to find a balance between saving and spending. Prioritize saving in order to secure your future.
1. Automation is Key
One key to smart spending and saving is to set up automatic payments and alerts. By doing so, you’ll avoid costly late fees and overdrafts. Additionally, it will boost your potential for lower interest rates on credit cards and loans. Payment reminders can help you pay your bills on time and avoid late fees; low balance alerts can help you avoid overdrafts.
2. Track Your Spending
In order to save more and spend less, it’s important to know where your money goes. To do this, it’s helpful to develop an accurate picture of your current spending. Then, focus on what you would prefer to spend money on in the future.
One way to track your expenses is to use an app or tool like Mint to record your spending habits. Everything from car, rent, and mortgage payments, to groceries, streaming subscriptions, and medications are tracked by Mint.
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3. Make Some Cutbacks
It’s important to understand your current expenses before you can effectively budget and save money. Break expenses into two categories: essentials and extras.
First, take a closer look at your extras and think of ways to cut back on spending. For most people, that will include subscriptions, memberships, and shopping. Additional expenses like dining out, entertainment, and vacations are also extras.
Your first savings goal should be an emergency fund equal to six weeks of your income. If you don’t currently have an emergency fund, start by saving a paycheck’s worth of income and go from there.
4. Establish a Comfortable but Reasonable Budget
Use the information you’ve gathered after following steps one through three to create a budget plan. The budget should allocate money towards your essential expenses, savings goals, and a reasonable amount of discretionary spending. Be sure to also include a cushion for unexpected emergency expenses.
To help with budgeting, use apps or tools that you prefer. One of the most popular and easy to use is Goodbudget.
5. Use Cash for Transactions Below $100
Now that you’ve established a budget, be mindful when spending. When you use cash, you physically hand over the money and see it leave your wallet. This can help you be more mindful of your spending and stick to your budget.
Additionally, using cash can help you avoid credit card fees, which can add up in a big way over time. Research has also shown that people tend to spend more when using a credit card compared to cash because the full impact of the purchase isn’t felt immediately. By using cash for smaller purchases, you may be less likely to overspend.
6. Take a 24-Hour Timeout Before Buying Non-Essential Things
It’s a very helpful strategy for saving money. Taking a 24-hour timeout before making a purchase gives you time to think about whether you really need the item, and if it’s worth the cost.
This can help you avoid regretting the purchase and having to deal with the hassle of returning it. Also, waiting 24 hours before buying something unnecessary allows you to shop around and compare prices at different stores or online.