While everyone wants to save money, most people have a hard time figuring out how to do so. The chances are high that although you plan to save a portion of your income for something important, it never happens. This is largely due to inadequate financial planning, which causes individuals to end up spending more than they should. You would have to be mindful of your earnings, your budget, and your needs to chalk out a strategy that works.
How can you save money more effectively?
While there are plenty of ways in which one could save money, here are a few tips that should be easy to follow and implement:
1. Record your spendings
You cannot make changes to your expenditures if you do not know what exactly you are spending all your money on. Try to maintain a logbook of your expenses and update it daily, such that you would know exactly where your money is going. Try to break down the expenses into categories, such as groceries and other essentials, energy bills, constant costs like mortgage and loans, etc.
2. Create a budget
To bring your expenses under control, you first need to chalk out a budget and have a clear idea of how much you are willing to spend. While you need to come up with a workable budget that doesn’t force you into a frugal lifestyle, do include a certain portion of your income as savings. Generally, saving around ten to fifteen percent of your monthly income should work.
3. Differentiate between your needs and your wants
You need to categorize your potential expenses and rank them as per priority. However, you should first separate your needs from your wants. For instance, while the groceries are essential, you can live without a large TV that you might have been planning to buy soon. If you are on a tight budget, you should certainly consider postponing luxury expenses for later.
4. Create an automatic savings account
One of the best steps to take while trying to save money every month is to create a savings account. Storing the money away from your main bank account would help avoid making unnecessary purchases not covered in your budget. Also, consider opting for automatic transfers to the savings account, a service that almost every bank offers.
5. Plan and limit your cash withdrawals
Withdrawing cash too often, especially from ATMs, can lead to unnecessary expenses in the form of usage fees. Instead, plan ahead and withdraw the money you need in a weekly or bi-weekly fashion. This would help you avoid ATM charges to a great extent, and every bit adds up. In case you feel that it would be hard for you to manage all the money, you may divide and mark the money for specific purposes.
6. Reconsider your subscriptions
Quite often, individuals spend a major chunk of money on gym subscriptions, Netflix or other services even if they do not use these regularly. In case you don’t really need a subscription, consider canceling it. You could even find cheaper or free alternatives, such as sharing a Netflix account with a friend or a relative. Also, it would be smart to cancel any auto-renewals and subscribe to such services only when you need them.
How to deal with your debts?
Individuals often find it hard to save money because they have debts piling up. Especially if you owe debts with high rates of interest, you might want to pay those off faster to save money over time. Once you are free of debts, you would have more money from your monthly income left over as savings. Hence, always prioritize clearing your debts while trying to save money.