In today’s fast-paced world, saving money has become more crucial than ever. Whether you’re striving for financial independence, planning for a big life event, or simply want to create a safety net for the unexpected, developing a habit of saving is a skill that can empower you with greater control over your financial future. In this blog post, we’ll explore a range of actionable tips and strategies that will guide you on your journey to saving more money effectively.
- Set Clear Financial Goals:
Before you embark on your savings journey, it’s important to define your financial goals. Whether it’s creating an emergency fund, saving for a dream vacation, or building a retirement nest egg, having a clear purpose for your savings will provide you with the motivation and direction needed to stay on track. These will likely change over time, so make time to regularly check in on these goals to make sure they still work for your current needs and vision for your future.
- Create a Realistic Budget:
A budget is your financial roadmap. List your sources of income, all of your regular expenses, your annual and/or quarterly expenses, and anticipated irregular expenses (e.g. a vet visit for your pet, a broken windshield for your car, etc.). This will help you identify areas where you feel you can cut back so you can allocate funds towards your savings goals. Keep track of your actual spending versus your anticipated budget regularly (weekly is a great idea so it doesn’t become a huge chore), and be kind to yourself if things look a little wonky. It’s not a failure, just an opportunity to evaluate and commit to creating new habits.
Verde’s Recommendation of Thirds for Budget Management
⅓ Necessities: Your necessities are your groceries, housing (including taxes), and transportation (car payments, gas, insurance, etc) and should not exceed ⅓ of your income.
⅓ Wants: The other ⅓ should be spent on your wants – entertainment, dining out, toys, etc.
⅓ Savings: That leaves you ⅓ of your income that you can save!
While this is a great rule of thumb, we also know that this may not be what your current financial situation allows for – that’s okay. You can grow towards this goal by using the 5 / 10 / __ method.
- Automate Savings:
Automation is your secret weapon to effortlessly increase your savings. Set up automatic transfers from your checking account to a dedicated savings, retirement, or investment account each month. This way, you won’t have to rely solely on willpower to save consistently.
- Reduce Unnecessary Expenses:
Trimming unnecessary expenses can significantly boost your savings potential. Consider cutting down on eating out, subscription services, and impulse purchases. Small changes in your daily spending habits can lead to substantial savings over time. At times we understand this can be easier said than done! Changing your spending habits and behaviors takes time, patience with yourself, and the energy and willpower to create a new process. Remember, these changes aren’t a “loss” in the short term – they are a gain for your long term success!
- Shop Smart:
When shopping, always look for discounts, coupons, and sales. You can make this process more efficient and less time consuming by leveraging apps for stores you shop at regularly; these apps let you digitally add coupons and savings to your rewards or frequent shopper’s card so you don’t have to carry around a load of paper coupons. You can also use tools to compare prices of items you’re contemplating purchasing across multiple online and brick & mortar stores. Also, consider buying generic brands instead of name brands, and explore thrift stores, consignment shops, or online marketplaces for second-hand items.
- Cook at Home:
Eating out can be expensive, and the cost of restaurant meals can quickly add up. Cooking at home not only saves money but also allows you to make healthier choices. Plan your meals, buy groceries in bulk, and prepare meals in advance to minimize food waste. Check out a presentation by Michelle Kopp, with Hope Financial, to learn more about cost cutting ideas around this topic in her presentation “Is Your Food Eating You?” from August 16, 2023.
- Negotiate and Comparison Shop:
Don’t be afraid to negotiate when making significant purchases. Many retailers are open to price negotiations, especially if you’re a loyal customer. Additionally, always compare prices and options before making a purchase to ensure you’re getting the best deal.
- Limit Credit Card Usage:
While credit cards offer convenience, they can also lead to overspending and debt if not used strategically. Try to pay off your credit card balance in full each month to avoid interest charges. Consider using cash or a debit card for your everyday expenses to stay within your budget.
- Generate Additional Income:
Explore opportunities to earn extra income, such as freelancing, part-time jobs, or selling items you no longer need. Investing your time in a side hustle can provide a significant boost to your savings.
- Be Mindful of Impulse Buying:
Practice mindful spending by giving yourself a cooling-off period before making non-essential purchases. Ask yourself if the item is a want or a need, and whether it aligns with your financial goals.
Saving money is a skill that requires dedication, discipline, and a clear plan. By setting achievable goals, creating a budget, automating your savings, and making conscious spending decisions, you can build a strong financial foundation for yourself and your loved ones. Remember, every small step you take towards saving more money brings you closer to financial security and the ability to pursue your dreams with confidence. Contact a Verde Advisor to start or improve your savings journey!