If you want to build true wealth, saving absolutely must be part of your financial game plan. However, unfortunately for many people, saving money is easier said than done but trust me when you find effective ways to save money, stacking up your bank becomes a breeze. Here are 7 ways to save that worked for me and can work for you too!
Number 1: Stop paying interest
One of the worst feelings in the world is receiving your bi-weekly paycheck and knowing that a big chunk of it will be handed over to creditors to cover your monthly interest charges. While this situation is less than ideal, many people are in this situation due to having a mortgage, student loans and even the worst of them all, credit card balances.
Luckily, there are a few ways to mitigate the ill-effects of interest which I will get into now. The first and most effective way to stop paying interest is to not get into debt in the first place. By avoiding debt you can avoid interest payments however in exchange you must be willing to put in the work to save up for all the purchases you make.
Another way to stop paying interest is to leverage forbearance. In financial terms, forbearance is when a creditor you owe money to allows you to pay back your loans and interest in smaller amounts or allows you to put a pause on these payments all together. While this is a temporary fix, it can often be exactly what you need to get your finances in order and be able to get back on a proper footing.
Number 2: Create a budget
The importance of a budget cannot be over-emphasized. Some people use a spreadsheet to carefully execute how money enters and exits their hands while others take a more old school approach and use pen and paper. In reality, the method doesn’t matter; only execution and adherence to the budget does. Now, given that many people don’t have a budget or lack a robust budget, I will briefly go over the components of creating an effective budget right now.
The first element in your budget is your monthly after-tax income amount. This can be income from your job, side hustles, passive income streams etc. This is what you will use as the figure that your expenses absolutely cannot extend beyond. Then, list out all of your monthly expenses like rent, groceries, utilities etc. Doing so should give you a remaining amount that will be designated as your saving target for the month. If this amount is too low and you want to save more, you have two choices: earn more or spend less.
The next step is to monitor your spending. It’s essential to keep your spending under control and by tracking your spending you will come to understand your spending behaviors much more intimately. This process will ensure you know exactly what’s taking money out of your pocket and help you cut down on unnecessary items where required.
Then, at month’s end, review your budget and see how close or far you were to hitting these budgetary figures and adjust accordingly!
Number 3: Have a monthly “money date”
Like everything else in this world, the relationship between you and money is relative to your personality. Isn’t it funny that everyone claims they love money, yet very few people ever have a date with their supposed love?
Since saving is an important element in wealth creation and financial stability, regularly keeping a money date with yourself is essential. Allow me to elaborate on what I mean by having regular money dates. A “Money date” is a set time that you check in with your money and see how you’re doing financially. It’s that time when you examine the relationship with your wealth and decide if you need to correct course or keep on the same path.
Now, how does this help you to save? By having these money dates, you can assess your saving progression, cut out unnecessary spending and adjust your spending behaviours if your financial goals have changed or you want to speed up your timeline to financial success!
Number 4: Get a saving coach
While these tips should help, saving money is not easy, and for some people, it’s next to impossible. You see, the issue for many people who struggle financially is that they let themselves get away with their poor financial decisions. For example, there are a ton of people who end each and every month having spent the entirety of their incomes and when you do this, there’s no chance you’ll ever see your bank account grow. If you identify as this type of person, then you need to get yourself a saving coach.
A credible savings coach will do the following things for you. First, they will will help you create attainable savings goals. For example, you may want to save $100,000 this year but on your $40,000 income, this simply won’t be possible so by having a good saving coach you can set goals that you can reasonably achieve and this will help you avoid a lot of anger and frustration.
Second, a saving coach will hold you accountable. When you work with a saving coach, you’ll be having regular check-ins where you will present your saving efforts and results and because of this you will feel much more inclined to stick to your good financial habits. So, if right now you’re struggling to save, perhaps you just need someone to help you along your journey!
Number 5: Set up automated saving deductions
If you can train yourself to automate your savings, you’ll be amazed at how easy saving can be. You see, as much as most people would like to save for the future, they don’t treat it as a crucial aspect of their financial game plan. In fact, saving is usually treated as an afterthought when all other needs are met.
However, what I want to show you is how you can maximize your saving potential rather than relegating savings to a matter to be considered after all other spending has happened. If you’re unfamiliar, an automated saving deduction is a technique by which an individual deposits a particular sum at preset intervals into a savings account automatically. The usual strategy for achieving this by routing part of every paycheck into a saving account rather than the full pay going into an every day account.
So first, what are some benefits of this saving approach. To start, making saving automatic means you don’t have to fumble around with your finances every month to ensure you save money. A preset amount is allocated to saving which makes it brain-dead easy. Moreover, by allocating these funds right from your pay, you ensure you’re not tempted to spend money that’s tagged for savings and this is especially important for those who find it super easy to overspend.
Now, how do you set this system up? Most employers these days will offer these deductions from your pay as long as you provide them the banking information to the specific account you want to route your paychecks to. Then, all you have to do is sit back and see your saving account rise over time!
Number 6: Set saving goals
As you should know by now, the strength of your financial foundation will depend on your saving capacity. The simple but essential practice of setting savings goals will help you establish long-term financial habits that will serve you for life. Not to mention, having a goal to keep you focused increases your chances of reaching those objectives.
Now, let’s discuss some helpful tips on ways to create realistic saving goals, shall we? The first thing to do is to define your goal. Be it a vacation, a retirement plan, a shortened mortgage repayment timeline on your house, your kid’s college education, whatever it is, note it down. Vague goals are rarely ever achieved.
In fact, most financial experts will tell you that you should decide exactly what you need your money to do for you and you only gain this clarity by setting clear financial goals.
The next move is to set a timeline by which you intend to have accomplished those goals. Your goals can be short, medium or long-term in nature. For example, planning to save up to buy a new car is a short-term goal, saving for a home down payment may be a medium term goal and retiring at age 65 could be a long-term goal you’re aiming to achieve.
However, if you want to attain the financial freedom you dream about, then planning and scheduling your savings is vital. You should be determining how much you can comfortably contribute to your savings account on a weekly or monthly basis.
For instance, if you have a goal to gather $10,000 to get yourself a new car in a year’s time, you could decide to save $833 a month. Moreover, if you’d like to have $1 million saved up for retirement, you might have to save $600 monthly based on your estimated portfolio returns. As you can see, the likelihood of having multiple savings goals at once is high and as such it is advisable to open multiple savings accounts for each of your goals.
So following the examples I gave earlier, you’ll need a different account for your car savings and another for your retirement plan. This way, you can easily separate your cash without leaving any of the goals dormant or lacking.
Number 7: Start to earn more money
You probably thought saving more money means strictly cutting down on expenses, but hey, you need more money to keep more and one of the surest ways to save more is simply to earn more. So, let’s discuss some viable ways to earn more money.
One of the lowest hanging fruits of earning more is trying to take on more hours at work. If your job offers paid overtime, then there’s no need to go through the hassle of applying for a second job or trying to create a side hustle to boost your monthly income. However, not everyone has this option available so let’s move onto some other means of making more money.
The second way to increase your monthly income is to get a second or third job. While it may not be glamorous, getting another job can be an easy way to make more money because you’ll start getting paid right away which many other income strategies tend to lack. Not to mention, working a second job allows you to build new skills and meet new people which is another form of compensation that shouldn’t be overlooked!
Finally, one of my favourite ways to make more money is by freelancing. With the recent pandemic forcing everyone indoors, groves of people have joined the online hustle train. If you’re so inclined, you can offer up your services as a writer, a graphic designer or any other service that’s in high demand. In fact, this is the approach I’ve used to increase my own income over the past few years and it has allowed my savings efforts to multiply much faster than when I was relying on a single source of income.
So there you have it, 7 easy ways to save more money today!