How do you even start?
We all know the importance of saving and budgeting. But knowing you have to do it is just half the battle — you actually have to learn how to save money to be successful.
When saving money isn’t a habit, getting started can be pretty difficult. But it’s not too late to start.
Here are 5 essential tips on how to save money:
1. Take account of your expenses
Before anything, you have to understand your spending habits. That means keeping track of all your expenses — every Uber trip, every cup of coffee, even every stick of gum. This is much easier to do if you just leave your credit card alone and pay with cash.
You can use a budgeting app like Seedly or Wally, or keep your receipts and log your expenses at the end of the day. Once you have all of your data on-hand, organise them into categories, such as food, rent, utilities, etc. (One perk of using a budgeting app is it organises your spending for you, so it saves a lot of time.)
Breaking down your spending like this lets you see just how much you’re spending on certain things, and where you can cut back. And that’s a great place to start.
2. Create a budget
Now that you know what you spend on, you can make a budget to limit your spending. Set an amount for each category; how much will you be spending on food? What about clothes? What about entertainment?
You might have to do some adjusting to stick to your budget, but once you get used to your new lifestyle, it’ll get easier to live within your means.
3. Be intentional with your savings
Simply spending less isn’t enough — you have to plan for it.Consider savings as a regular expense in your budget, not just an afterthought. Most banks let you transfer money between accounts automatically, so you can set this up and guarantee that you’ll be setting aside money every month.
Try to save around 10-15% of your income. If you don’t think you can do that, see where you can cut back. For example, maybe you can spend less on entertainment or going out. Maybe you can cut back on the shopping trips.
4. Set long-term and short-term goals
Is there anything in particular you want to save for? Apart from short-term goals like a vacation or setting up an emergency fund, think about long-term goals. What about your retirement? Or a down payment on a home?
As you save for your short-term goals, be careful not to neglect the long-term.
5. Choose the right tools
It’s a good idea to set up a separate bank account for your savings. There are certain tools that make it difficult for you to withdraw your money, such as a certificate of deposit, which locks down your money for a certain amount of time.
To achieve your long-term goals, you can open up a retirement fund, or invest in stocks or mutual funds. But take note that investments come with risk, and there is a possibility of you losing your principal investment.
Source: Bank of America
We hope this article on how to save money was helpful!
You might also be interested in these articles below: