Most of us wish we could save more money. So why don't we? You say you've heard it all, but here you are in the same spot as last year.
This boils down to two things. The first is that most of us don't have a good handle on what our expenses are in relation to our income. The second reason we don't save more is because we're not aware of our money-sucking habits. Here are a few steps you can take to gain control and save more money. They take less time than you think. So why not get started today?
1. Write Down Why You Want to Save. Write down all the reasons you want to save more money. The obvious things are for retirement, to buy a house, for college education, for travel, and for that special toy you want (car, boat, etc). Other reasons might be to have financial security, peace of mind, the ability to help others, to feel in control, and other non-tangible reasons. By being clear about why you want to save more, you'll be more likely to stick with it. Write these reasons down at the top of your budget and carry this around with you in your wallet.
2. Know Your Income. Know what your exact monthly income is by looking at your net pay. Sometimes we just mentally think of our gross income because it makes us feel better, but we need to look at the actual net number after taxes are deducted.
3. Do an Expense Inventory. Write down all your expenses for the month or type them into an excel spreadsheet. If you have time take a look at a few months to get an accurate average.
4. Calculate Your Monthly Net Income or Loss. Take your net income and subtract your net monthly expenses. That's the amount you are either saving or losing monthly. Congratulations. Now that you know the number, now you can do something about it.
5. Set a Budget. The easiest way is to use this free online budget service, The Beehive. Alternatively, you could use software such as Quicken or Microsoft Money. Or if you like to keep it very simple, use an excel spreadsheet with a column for income sources and a column for expenses (including savings). The goal here is to allocate your monthly income to a monthly maximum for each expense type and a minimum for your savings goal.
6. Free Up Some Money (Cut Your Expenses). After you've tallied your expenses, review each one. Where can you make cuts? For instance do you use all the minutes on your cell phone plan? Could you downgrade? How about your home phone? Could you do without it? Do you watch enough TV to justify all the cable channels you have? Call the cable company to find out how you could downgrade. $20 here, $40 there, another $60, and suddenly you've freed up $100/month that could go towards savings or debt reduction.
7. Pay Off Credit Cards First. If you have credit card debt that charges more than your savings account pays, then the most sensible decision is to pay down your debt first. Switch to the lowest rate you can while you pay it off. After you have paid off your credit cards, only buy what you can pay off at the end of each month. If you have trouble controlling spending, then close your credit card accounts and use cash.
8. Add to Your Income:
- Second Job - choose something you like to do anyway. If you like to fish, get a job in a fishing supply store, or maybe offer classes on how to fish. Check out the book 150 Jobs You Can Start Today for some ideas such as Massage Therapist, Wedding Planner, Music Teacher, Artist’s Model, Personal Assistant, Yoga Teacher, Personal Trainer, Sports Referee, Pet Care, Professional Companion and more.
- Sell Products from Network Marketing Programs -Avon, Mark, Tupperware, Mary Kay, Arbonne, The Pampered Chef, Shaklee, Amway, and more. Perhaps you could sell these products at your local weekend flea market.
- Start a Blog or Website with Advertisements - write about what interests you and have advertising that will appeal to your readers. This one will most likely take some time to generate income, but stick with it and you'll add some cash to your bottom line. Here is a list of resources for making money with a blog. And here is a resource for how to start a blog.
- Sell stuff on Ebay! Start by cleaning out your house of all the things you don't really need. Remember, one person's garbage is another person's treasure.
- Freelance Writing. There are many good books on this topic. Click here to find some of them at Amazon.
1. Try Out Books Before Buying. Use your local library. You can get more than just books these days. Borrow movies and music for free. Audiobooks complete with their own mp3 player are available. And libraries are a great place to find out about arts and cultural events, which are often free too. One great trick that I love is requesting materials online. This way when I go into the library all I have to do is pick up the books, movies and music that I want. It's a great time saver.
2. Don't Go Shopping for Fun. This means catalogs too. If you don't see it, you won't desire it. If you don't desire it, you won't buy it. This will save you tons of money and time! If you love going to the bookstore, like I do, try this trick. Browse to your heart's content. Pick up all the books that interest you. Then when you're done "shopping," write down all the titles and authors. When you get home, go online and request them from your local library. Even if your local library doesn't have the book, often another library in their network will. If you love to go clothes shopping, be sure to refer to your budget first to see what you can afford.
3. Set Aside a Separate Savings Account. Having a separate account just for your savings has a couple of benefits. You can choose a bank, brokerage firm, or mutual fund company. You'll be able to more clearly see your progress, and also you'll be less likely to tap into it if it's not connected to your checking account. Be sure to look for the best rates as even small amounts over time make a big difference in the long run. Check out this guide to Investing Made Easy.
4. Car Considerations. Think about how you use your car. Calculate all the expenses of your car including loan payments, insurance, gas, and maintenance. Could you do without a car? Could a used car serve you just as well? Could a smaller car serve you just as well? Run some numbers and then consider these options that could save you money:
- Raise Your Deductible on Your Insurance.
- Buy a More Gas-Efficient Car.
- Buy Used Car.
- Ditch the Second Car or Trade in for a Used Car.
- Ditch Your Car Altogether.
6. If You Can't Buy Used, Buy Online. Avoiding stores will benefit you in several ways. You save time driving around. You save money because you can find the best price. Often you can get free shipping from places like Amazon.com. You'll also save money because you won't be tempted to buy things you don't need.
7. Food and Drink. Cook your own food, brown bag your lunch, make your own coffee, and refill (and wash) your water bottle. Just look at coffee as an example. If you buy a $3 coffee every work day, that's $750 in one year. If you save that money and get a 5% compounded return over 10 years, you'll have nearly $11,000. And that's just coffee. Analyze your food and drink habits to see where you can save.
8. Entertainment. Take a look in your local newspaper for free and cheap arts and cultural events. Check out museums. Borrow movies from the library. Entertain at home with friends and family. All of these things can add up to big savings.
What ways do you save money? Please share! We'd love to hear from you!
Written by K. Stone of Life Learning Today.