It is going to take a few months to a few years depending on your savings goal, so go ahead and set your monetary goal right now. Do you need $1,000, $5,000 or $10,000? Do you maybe only need $500? Set that goal down and write it on a blank piece of paper. This number determines how long you need to cut back on spending habits.
Take your goal and either divide it by the amount of money you think you can set aside each month (eg: $50) or by the number of months you would like to reach this goal (eg: 2 years or 24 months). The first option will tell you how long it will take to get to your goal (for example, by saving $50 each month), and the second option will tell you how much money you will need to save each month to get that amount of money in time.
It is helpful, though not necessary, to spend a day or even a week tracking where your money goes. That way you can see how the little purchases – a coffee here, a new shirt there – add up and could be better off in your savings account. If you use a debit card to spend money this can be as easy as looking at your statement each month. Try putting these items into categories such as food, bills, and gas expenses. How many of these items were needs? How many were wants?
If you notice that you are spending your money on too many wants, you can consider other ways to have fun or eat without spending money. Look up free shows, museum passes, listen to music, or watch movies from the library for some free sources of entertainment. Try to set a grocery budget each week and stick to a shopping list so that you can cook your meals and you will be less likely to order out. For new clothes, consider that most people only use about 10-25% of their entire wardrobe. Dig out some clothes you may have forgotten about and cycle those into your regulars, or borrow from friends. If you really need new clothes, stick to a budget and consider selling or donating your older clothes so that you can free up some space.
After you figure out where your money actually goes, the next step is to figure out where your money needs to go. Figure out your monthly income (the amount you take home from working). Write down your fixed expenses for the month such as: rent or mortgage, utility bills, internet and phone bills, credit card bills, car payments and insurance, health insurance, gas and food. Hopefully these alone will not total your income, because we need to save room for things that are not monthly like doctor visits, hair cuts, maybe budget some money for new clothes every season, etc. After this is all calculated figure out the difference between your expenses and your income. That is the amount of money you can safely save, without cutting anything out. If there is little to no money left over then you may want to consider getting more hours or a second job if this is possible.
If you cannot make additional income then you need to cut back on spending. This part is uncomfortable for many, which is why very little Americans are saving money right now, even though we need to have money saved up for emergencies and large purchases. Consider the things you can do without for at least the time you’ll need to save money for your goal.
- Do you need internet, cable, or your cell phone AND a land line? Consider dropping your landline and your internet to save money and going online at the library for a while.
- Do you absolutely need cable? You can keep the internet instead and drop the cable and watch many episodes for free online.
- Do you need to buy that daily cup of $4 coffee? A daily $4 coffee habit is $120 a month. Cutting that alone could be a nice savings each month and the costs of brewing coffee at home are miniscule.
- Are there other little areas like the coffee habit model that you can take control? How about cigarettes or eating lunch at the same place everyday?
- Is there a gym membership wasting $20 or more each month? Cancel it and work out outside or at home.
- Do you need to spend money on brand name products? Go to your local discount supermarket and buy most of the things there. It is okay to splurge on good quality vegetables and meat, but for the most part, saving is the name of the game.
- Find ways to keep yourself groomed for less, especially ladies. Do your nails at home, take longer in-between hair cuts, and dye your hair at home with the help of a friend.
- Drinking is expensive, especially when done at nightclubs. A once a week cover fee of $20 is $80 per month, not including drinks and parking and other purchases. One can easily spend $50 or more on a single night.
- Is your bank practically stealing money in fees? Find a better bank, and watch your money so that you don’t waste money on overdraft fees or bounced checks.
- Are you throwing money away paying your bills late? Keep a calendar up to date and set reminders on your phone or set up auto-pay through your bank so that you can avoid this.
- Is your car, home, or health insurance the lowest it can be? Search for quotes to make sure you aren’t wasting money on that, either.
- How often are you eating out? Cut this number in half or avoid eating out altogether, save for special occasions. Why pay for someone to make it when you can make it yourself?
- Is your cell phone bill the lowest it can be for the features you want? Do you need texting right now? Find a way to lower it if possible. Cell phone plans are as low as $30-40 a month nowadays. However, Smartphones require a data plan which tacks on $30 or more per month, so if you want those features it is unavoidable.
- Is there anything you can sell that you no longer use? Look around the house and sell on Craigslist or eBay for some quick cash in a pinch.
- If this is not a priority right now, consider paying the minimum payments on your credit cards for the amount of time it takes for you to reach your goal. Focus on not using your cards at this time.
These are just a few tips to get you thinking about ways you can save money. It can seem daunting at first, but after a while you will not notice the things you are doing without. All it takes is a little bit of delayed gratification to get what you really want, be it a new car, apartment, or whatever you can dream – with some money saving tricks and a lot of patience, you can do it.