Benjamin Franklin once said, “a penny saved is a penny earned.” He was right! Money may not be the epitome of happiness, but it is a necessity, and that makes saving incredibly important.
For many, it is a struggle, though.
Squeezing out a few bucks from your limited monthly income can be particularly challenging, especially if you are working a low-paying job or doing minimum wage labor. You have to be mindful of your income and expenses, but how?
Before we answer the big question, let’s talk about a few reasons to save money. Egregious unexpected expenses and emergency spending can cause turmoil, and savings can be the difference between preparedness and bankruptcy or, worse, homelessness. Savings can help you combat;
- Aging real estate
- Medical bills
- Natural disasters
- School and university fees
- Big events like weddings, divorce, or separation
- Legal trouble
- Sudden unemployment
- Mental illness and substance abuse
And much more.
While sudden spending and big expenses can impact your credit score, dipping into a savings account isn’t one of them, which further supports the argument that savings can be, well, life-saving. However, the ripple effect of any empty savings account can lead to a bad credit score in the long term, and shaky credit history is often enough for any bank to turn you away when applying for loans. However, if you find yourself a guarantor, you can improve your loan eligibility even with a low credit score and get yourself out of debt.
Once you’re out of debt, you can start saving.
Here’s a list of tips to help you do just that.
1. Keep track of your expenses
Tracking monthly expenses is difficult, especially when you aren’t mindful of your daily spending habits. It’s easy to forget small expenditures like food, cigarettes, commute, or snacks, and that can cause a real dent in your saving plan.
Categorizing expenses is one of the best ways to keep track, and you can start by saving receipts. By the end of the month, gather them up, and sort them out. You can divide them into two kinds of categories like fixed expenses and flexible expenses.
Recurring fixed expenses include house rent, car payments, electricity bills, and healthcare payments. In contrast, your flexible expenses vary from month to month. These include entertainment, dine-outs, clothing, online shopping, travel, etc.
Manual notes might be difficult, but a more manageable alternative is downloading an app or creating an excel sheet that you can access on the get-go and update from anywhere at any time.
2. Create a budget
Budgeting is the key to getting a grasp on your spending habits and creating a solid saving plan. Depending on your income, the budgeting equation may vary however there are a few things that are fundamental to the budgeting template.
Identify the money coming in. This can be from your full-time job, freelance work, contractual work, or part-time gigs. Irregular income can impact your budget plan, which is why it’s best to keep the supplemental income out of the budgeting plan. Subtract fixed expenses, taxes, and 401(k) deductions. From the remaining amount, at least 10-20% should be going to your savings account and the rest can be used for flexible expenses.
If you find it challenging to save even 10%, cut down on flexible expenses.
3. Avoid impulsive buying
So you went out to meet some friends, but a quick hangout turned into a night of drinking, which eventually led to drunken online shopping. Online shopping while drunk has quickly become a booming industry worth billions, and who among us can deny the appeal of material things while intoxicated.
If you don’t want to wake up to confirmation emails of purchases worth hundreds of dollars the next day, start shopping sober. It may sound counterintuitive because, after all, you ARE trying to save; however, shopping sober means you won’t make impulsive choices and spend more than you need to.
If you’ve been eyeing something on eBay or Amazon for a while, evaluate your budget and buy it in a sober state rather than waiting for getting drunk and making impractical decisions.
An easier way to avoid impulse buying is by making a shopping list before heading out. Impulsive behavior automatically lessens when you’re only focused only on what you need and aren’t distracted by every shop or aisle on the way.
4. Reduce energy consumption
Electricity bills take away a big chunk out of your monthly income. So do yourself and your wallet a favor by saving energy and turning off extra lights, and unplugging appliances in rooms you’re not using.
Seal all the cracks in your home for better insulation to reduce the need for heating or an air conditioning system. Change the settings of your electronic devices to a low consumption mode to save more energy. Investing in power-saving appliances like inverters may be costly in the short term but will cut down your utility bills in the long term.
5. Try spending less on entertainment
From Netflix subscriptions to 4G, movies, social gatherings, night outs, and premium subscriptions for Spotify, news websites, or other apps, entertainment can eat up a big chunk of your income.
People spend a lot on entertainment; however, these expenses can be easily avoided if you prioritize your needs and wants. Replace Spotify premium with free Youtube, 4G data connection with a fixed WiFi, newspaper subscriptions with watching news on TV, and going to a theatre for a movie with a nigh-in with your loved ones.
Similarly, instead of dining out at an expensive restaurant, you can host a casual potluck at your place. Cutting down on entertainment doesn’t mean you have to stop enjoying life because there are tons of low-cost options that are just as fun and can save money.
6. Start a side hustle
Utilize your free time by starting a side business or working part-time jobs. It can be anything like babysitting or walking dogs. If you are creative and can paint or create marketable products, sell them online.
You can choose a venture that demands less investment and gives more yield. Similarly, being productive on your holiday is an excellent way of making money without going to an office.
Final word
Saving isn’t rocket science when you’re committed and have your priorities sorted. Make a plan and stick to it. Implement these tried and tested tips for saving money each month and every once in a while, review it to account for elements that aren’t set in stone, like a pay raise or inflation.
