How to Start Saving Money on a Budget
November 6, 2019
It is not easy for most people to set aside some money for a rainy day or for some future objective. If you are one of these people, this guide will help you follow simple and straightforward methods on how to start saving money.
Take Note of Your Expenses
The first step towards saving money is listing all of your expenses. Try to categorize these expenses and add up each amount. Review your bank statements and credit cards to ensure your calculations are accurate.
Make a Budget
The next step is to make a budget. A 50/30/20 budget is an ideal money management strategy. Use 50% of your income for necessities, 30% for your wants, and save the remaining 20%. In case any of your allocations go above these ratios, make the necessary adjustments to ensure they all balance.
Cut on Your Spending
Sometimes the best way to meet your target savings is to cut your spending. Identify the things you can afford to spend less on, such as dining out and entertainment. Also, find ways to save on monthly expenses like cell phones and television subscriptions.
Daily Savings Tips
Some daily habits may seem irrelevant to your savings plan, but they could make a big difference on how much you’re able to set aside. Try using an automated banking tool to transfer money from your checking account to your savings. That way, a little bit of your money is being saved automatically, and you may not even notice.
Plan your purchases and try to avoid impulsive shopping. If you see something you really want to buy, make note of it. If you’re still thinking about it next week, maybe it’s worth buying, so plan for it in your budget.
Set Savings Goals
Setting goals is the best way to stay motivated when you’re trying to save on a budget. Think about your short- and long-term savings goals. Calculate how much you need to achieve these goals and how long it will take, depending on your financial resources. One tip to motivate you into developing a habit of saving is to start by saving for something fun and not necessary. For example, saving for a holiday gift may give you enough motivation to start saving and before you know it, you’re developing a habit of saving money.
Find the Right Tools
For short term goals, use an FDIC insured savings account and a certificate of deposit that locks money for a fixed time frame at a rate that is higher than traditional savings accounts. For long term goals, consider using FDIC insured retirement accounts and securities like mutual funds and stocks. You do not have to necessarily choose just one account to save in, review all your options, and look into things like interest rates, fees, and balance minimums. This will help you choose the ideal savings account for your goals.
Keep Track of Your Savings
Look through your budget and monitor your progress on a monthly basis. Making these checks and balances will allow you to stay committed to your savings plan and identify any areas that need re-calculated.
Developing the habit of saving money is not always easy. It takes discipline and time to save money for both your short and long-term goals.
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By Jeff Mohlman