Sometimes the hardest thing about money is management and savings. these simple steps will giude you on how to save money.
1. Record your expenses
The first step to start saving money is to figure out how much you spend. Keep track of all your expenses—that means every coffee, household item and cash tip.
On the first day of a new month, get a receipt for everything you purchase throughout the month. Stack the receipts into categories like restaurants, groceries, and personal care. At the end of the month you will be able to clearly see where your money is going. Additionally, your bank or credit union may have this as an online-banking feature. Seeing what you spend in total on food, shopping, etc. can be humbling!
Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Use your credit card and bank statements to make sure you’re accurate—and don’t forget any.
2. Make a budget
Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance.
3. Save for a purpose
Don’t just save money, save for your future. There IS a difference!. As you begin to #ThinkLikeASaver, don’t simply spend less. Save with a purpose, such as college expenses, retirement, or for emergencies. Learn more about what you should be saving for here.
One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for—perhaps you’re getting married, planning a vacation or saving for retirement. Then figure out how much money you’ll need and how long it might take you to save it.
If you’re saving for retirement or your child’s education, consider putting that money into an investment account such as an IRA or 529 plan. While investments come with risks and can lose money, they also create the opportunity for growth when the market grows, and could be appropriate if you plan for an event far in advance.
4. Cut your spending
If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. Identify nonessentials that you can spend less on, such as entertainment and dining out. Look for ways to save on your fixed monthly expenses like television and your cell phone, too.
Here are some ideas for trimming everyday expenses:
Use resources such as community event listings to find free or low-cost events to reduce entertainment spending.
Cancel subscriptions and memberships you don’t use—especially if they renew automatically.
Commit to eating out only once a month and trying places that fall into the “cheap eats” category.
Give yourself a “cooling off period”: When tempted by a nonessential purchase, wait a few days. You may be glad you passed—or ready to save up for it.
Tip: Set a small, achievable short-term goal for something fun and big enough that you aren’t likely to have the cash on hand to pay for it, such as a new smartphone or holiday gifts. Reaching smaller goals—and enjoying the fun reward you’ve saved for—can give you a psychological boost that makes the payoff of saving more immediate and reinforces the habit.
Avoid purchasing expensive or unnecessary items on impulse with a self-imposed 24-hour rule. For any non-essential item, wait 24 hours before purchasing. It’s perfect for online shopping where your items can simply be added to your cart to purchase later.
6. Treat yourself, but use it as an opportunity to save.
Match the cost of your nonessential indulgences in savings. So, for example, if you splurge on a smoothie while out running errands, put the same amount into your savings account.
7. Decide on your priorities
After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings. Be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs.
Tip: Learn how to prioritize your savings goals so you have a clear idea of where to start saving. For example, if you know you’re going to need to replace your car in the near future, you could start putting money away for one now.
8. Pick the right tools
If you’re saving for short-term goals, consider using these FDIC-insured deposit accounts:
Certificate of deposit (CD), which locks in your money for a fixed period of time at a rate that is typically higher than savings accounts
For long-term goals consider:
FDIC-insured individual retirement accounts (IRAs), which are tax-efficient savings accounts
Securities, such as stocks or mutual funds. These investment products are available through investment accounts with a broker-dealer. Remember that securities are not insured by the FDIC, are not deposits or other obligations of a bank and are not guaranteed by a bank. They are subject to investment risks, including the possible loss of your principal.
Tip: You don’t have to pick just one account. Look carefully at all of your options and consider things like balance minimums, fees and interest rates so you can choose the mix that will help you best save for your goals.
9. Automate your savings
Automating your money not only makes your life easier, but it makes you feel like the percentage you’re saving just doesn’t exist.
I have 26% of each paycheck automatically deposited into a high-yield savings account . This savings account is purposefully at a different bank than my day-to-day checking account, so I’m less likely to withdraw from it and less likely to think about it. This “set it and forget it” level of financial freedom was something I worked hard for through money diary-ing, budgeting, and conscious spending. So now, my savings amount is completely on autopilot.
10. Side hustle
apart from your major job, take freelance jobs to improve your income. this increases your saving power. The more money you make, the more you can save.
11. Watch your savings grow
Review your budget and check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly. Understanding how to save money may even inspire you to find more ways to save and hit your goals faster.