Almost everyone reading this article understands the importance of saving money, but few can save for many reasons. Saving money is understandably tough because, as humans, we are wired to satisfy our desires right away and then worry about what may come later on. In fact, putting money away for what might be a rainy day goes against our nature and urge to make decisions based on what we need right now.
We always tell people that you can save a great deal of money by just putting away a little bit each month. Even if you work a minimum wage job, it is possible to put away a few dollars each month, which over the years with the right investment strategy can become your retirement nest egg.
Below we’ll take a look at a few highly effective ways of saving money. However, feel free to modify and tailor these methods to your needs and circumstances.
Start By Paying Off Debt ASAP
One of the reasons many people find it near impossible to save money is because they have accumulated a great deal of debt over time. It can be bills, credit card debt, a car loan, or all of the above that takes its toll on your finances. However, it is imperative that you start taking a closer look at what you are paying for? Find out if you are spending 40% to 90% of your paycheck on credit card balances? If that’s the case, it means you’re paying what you used on the card and its interest rate.
The longer you carry that outstanding debt on your credit card, the more it will cost you in the way of interest. However, you can start saving that interest if you pay off the debt on the card. One way of doing that is to pay off as much extra as you can, and then once your credit card is paid off, you can move on to the next debt with the most interest. Continue to move down the list until all your debt is paid off.
Automate Saving Money Just Like Paying Bills
Many people start by paying their bills, then they spend on having fun and if they have money left, will save. However, in our opinion and experience, that’s the wrong approach. What if you decided to save money automatically, maybe a certain amount each month before you even start paying bills and having fun?
Doing it is easy; you can set up automatic transfers directly to your savings account or setup it up to directly deposit part of your paycheck into savings every day. You can start with an amount that can easily be afforded and then take a more ‘big picture’ approach to set long-term saving goals.
Set a reminder to re-evaluate your budget to see if the savings amount can be easily adjusted. It might be an excellent time to look at all the goals you are setting for yourself and possibly reset a few if they no longer hold any importance. Look for small ways that you can save money on your day-to-day or monthly expenses. For instance, you can save money by using the PhilRx drug discount card on your prescription drugs.
It is important to set realistic goals and make sure that you break things down into milestones; taking this approach will encourage you to continue.
Build an Emergency Fund
Having an emergency fund can quite literally be a lifesaver for you and your family members. Many times a medical emergency or even a minor medical procedure can set you back several hundred dollars, which then put you into debt. Having an emergency fund saves you from that problem.
An Emergency Fund also buys you time if something happened and you may be lost your job. Your goal should be to put away at least three months’ worth of living expenses into the emergency fund. It will buy you some time if something happened like losing your job, a medical emergency, or you are moving to another city in hopes of a better opportunity. However, you don’t need to set aside three months’ worth of savings at once; you can start by breaking it down into small portions, which you put away each month. It is the most effective way to build up towards a substantial amount.
Everyone struggles to save money, especially those who live paycheck to paycheck. However, with a few simple tweaks, it is possible to start saving money starting today. All you have to do is change the way you look at how and when money is spent.