It can be challenging to save money, especially if your expenses are too high. There are proven ways on how you can start saving without sacrificing a lot of things. So I’ve rounded up some useful tips on how you can save money more realistically. These tips will not only help you save for a short period of time, but for long-term saving as well.
1. Keep Track Of Your Expenses
The first tip that you need to do for you to be able to save money effectively is to keep track of your expenses. You need to keep track of everything, including cash tip, household items, and even your coffee. Once you have the data, start organizing everything by categories, including mortgage, groceries, gas, and make sure to tap everything. You can also use the bank statements for your credit card to ensure that everything is accounted for.
Pro Tip: To help you get started, you can start using a free tracker. You can choose from digital apps or programs that can help you to work on your expenses efficiently. This will also help categorize your transactions automatically.
2. Start Budgeting
Once you start keeping track of your expenses, you can begin organizing and removing the nonessentials. After doing that, you can check your expenses and compare it to your income. This will help you to limit your spending and as well as to avoid overspending. Also, don’t forget to include other expenses that don’t regularly occur, including car maintenance.
Pro Tip: Make sure to add a category for your savings. It would be best to save 15-20% of your income at least.
3. Cut Your Expenses
If you notice that your expenses are always high each month, it would be best to start cutting your expenses. Using your tracker, check the nonessentials that you can eliminate, including dining out and entertainment. It would be best to spend less on your fixed expenses, including your mobile phone and your television.
Ways to cut back on your expenses:
When tempted to purchase things that you don’t actually need, give it some time. Let it pass or you can always save for it instead.
Avoid eating out and make sure only to do it once a month.
Cancel memberships and subscriptions that you don’t actually use.
Use different resources, including low-cost events, and community listings to help reduce your spending on entertainment.
4. Set Up A Goal
Start setting up a goal so you can effectively save money. Think of the things that you might want to save money for such as your retirement, vacation, or a new home. You also need to start figuring out how much you want to save and how long it will take you to save that certain amount of money.
You can save for a short period of time, which usually runs from one to three years. This can be for a car’s down payment, vacation, and emergency fund. Long-term goals can run from four years and above, which you can use for your retirement and child’s education.
Now if you are saving for your child’s education or your retirement, it would be best to put the money into a bank’s investment account. There may be some risks when it comes to investing, but the opportunity for it to grow is also high.
Pro Tip: Always make sure to start setting a small goal for a short period of time. You can start saving for your next vacation to make things more exciting for you.
5. Know Your Priorities
Start figuring out your priorities right after tracking your expenses and knowing your goals. Always remember your long-term goals, as this is more important than the shorter ones. Preparing for your retirement should be one of your priorities.
Pro Tip: You should learn to prioritize your goals when it comes to saving. This will help you keep going and keep you prepared for things like replacing your car or for your home renovation.
6. Choose The Right Tools
For short-term goals, you can consider CD or the certificate of deposit and a savings account. CD will keep your money locked up for a certain period of time. It will start earning higher interests compared to a savings account.
For long-term goals, you can choose mutual funds or stocks, and wherein a broker can help you with investing to both. But remember that these two are not insured, which means that the deposits are not guaranteed and not the bank’s obligation. You can also choose FDIC, which are savings accounts that are tax-efficient.
Pro Tip: You have the option to pick as many accounts as you want. But make sure to check the minimum maintaining balance, interest rates, and fees. Choose the accounts that will help you achieve your financial goals.
These are the tips on how to effectively save money without sacrificing too much. Tracking and budgeting your expenses may not be easy at first, but you will surely get the hang of it. With the right determination, you will surely be able to achieve your financial goals in no time.
Photo Sources: RD.com, iStock photo, Flickr, Money Control
Based On Materials from The Balance