At the end of the month, you want to finish with money left over from your paycheck so that you can either put it away into your savings account or use it to pay down your debt. There are many different paths that you can choose to achieve that target. The important thing is to have a plan and stick with it. Here are eight ways that you can reach your savings goal in any given month.
If you start your saving plan with an amorphous desire to simply save money, you will not be true and honest to yourself with your spending. You need a target in order to hold yourself accountable. This will give you something to measure yourself against each month.
These goals should be moderately difficult to achieve, but not impossible. In order to make these achievable, you should make the time period for your saving target relatively short. It is easier to hit your goal of saving in a week than it is in a month or year because the goal will be smaller and you will have more visibility. In other words, it is easier to save $25 in a week than it is to save $100 in a month.
Not only should you have specific monetary savings goals, but you should also set benchmarks for life events that you are saving for to help motivate you. For example, your goal could be to save for a child’s college education or a wedding. Alternatively, you could decide that you are putting aside money for a down payment for a home.
You cannot really be successful in saving money without knowing where your funds are being spent each month. Learning where you are expending your hard-earned funds is the first step in this process. A budget is where you begin to exert control over your spending.
Of course, you cannot will certain things out of your budget every month just because you want to save money. You need a roof over your head and food on your plate for starters. But you can also control in your budget what you spend other money on each month. This is where you track your spending on luxuries that could possibly be cut back on in an attempt to save money.
There are several different parts of the budgeting process. Laying out your desired spending targets, quite honestly, is the easiest thing that you will do with your budget. The harder part is measuring whether you are following your budget each month.
It is best if you are able to track all of your spending, preferably down to the penny. It is the dollar here and the dollar there that trip you up when it comes to sticking with a spending plan. You can find smartphone apps that can help you with budgeting and keeping track of your spending. You can even compare your spending to your budget in real-time to make sure that you do not exceed your targets.
You never quite realize how the interest charges on what you owe blow a hole through your finances until you have paid off debt and realize how much extra money that you have. When you are paying interest rates of over 20 percent on credit card debt, this could mean that you are paying over $100 each month just to finance your debt. Therefore, when you get rid of your debt, you are actually increasing your income because the financing on your debt is a sunk cost each month.
You want to start by paying off your debt that has high-interest rates, If you can make a dent in this little by little each month, you will find that it will start to add up to bigger savings. My retiring your debt, you can save an extra $50 or more each month.
One of the worst financial mistakes that people will make is to treat their tax refunds as “found money” and proceed to spend it immediately on a luxury. The fact of the matter is that a tax refund is money that you earned that the government took out of your paycheck and is now giving it back to you. Putting your tax refund aside every year as opposed to spending it can almost single-handedly give you the money that you need to reach your savings goal. If you spend your refund immediately, you may come to regret it when you have an unexpected expense that comes up later in the year that may cause you to go into debt.
If your employer has a 401(k) matching program, you can turbocharge your savings by putting money into this account. While you cannot have access to it immediately without a penalty, you are literally getting free money when you take advantage of an employer matching program. Many employers will match your contributions to your retirement up to five percent of your income. Employees who fail to take advantage of this are leaving money on the table. Although this is money that you cannot use right now, it is there in case of an extreme emergency and sometimes you can borrow against your 401(k) as a last resort.
Once you get yourself into the frame of mind that you will be a money saver, it really does get easier to put money aside. This is because you have made savings a priority. At the risk of sounding hokey, those who think like a saver will be a saver. When you think like a spender, your thoughts center on what you can buy and how you can purchase even more. Transitioning to a savings mindset still allows you to purchase, but you only buy what makes sense. Then, when you do spend money, you are also looking to where you can economize. Thinking with your savings hat on will keep you from overspending and falling into various debt traps that suck people in and keep them owing money for a lifetime.
There are good days in your life when you will come into some unexpected cash. It happens to all of us every now and then. When that happens, you must be smart with your newfound fortune. There is nothing that says that you cannot treat yourself with some of your bounty, but get into the habit of putting at least some of it away. For every time you get a pleasant surprise, you also get a nasty one too that requires that money comes out of your pocket and you will have to reach into your savings to fund it. In other words, for every seven bountiful years, there are seven lean years too for which you need to be prepared.
Saving money is not impossible even though some days it seems like an uphill climb. Adopt a saving mindset and take actions that further your goals and you will be well on your way to having some savings to help you in life.