Consumers have all kinds of options for saving money. Some opt for loan providers like banks while others seek out viatical settlement companies to turn life insurance policies into ready cash. The fact is, there are several methods that can work for the huge majority of people who have a serious intention to begin accumulating money. Whether your goal is a retirement nest egg or a short-term emergency fund of three-months’ wages, the time to begin is now.
Sit Down and Make a Realistic Monthly Budget
Making a budget is a two-step process. First, you want to carefully track your spending for one month. It will be useful if you know some bookkeeping basics. Be sure to record every single penny that goes out. Monthly bills for utilities, fuel, insurance payments and other common categories are easy. Discretionary spending is harder to track and tends to “leak” out, dollar by dollar. Like everyone who budgets, you’ll be surprised at how much you spend on non-bill items like snacks, coffee drinks, candy, and chips.
After tracking your outflow, take your time writing out a complete monthly budget that includes all money spend as well as every source of income. Don’t forget cash you earn from online selling, doing odd jobs and work bonuses. Whatever is left over after deducting spending from income is potential for savings.
For your first budget, simply create a category “savings,” and allocate every surplus dollar to the category. Decide on specific dates for when the money will be deposited, either with payroll deductions or cash deposits.
Set Up an Automatic Savings Plan at Your Bank
Talk with your bank and employer about automatic savings plans. One or both will be able to help you arrange to set aside a fixed amount of money from each paycheck. Start small, with perhaps just $20 per pay period, and you’ll be able to tuck away about $500 each year. That’s not a super-fund, but your goal is to begin saving, and to learn the habit of putting money aside.
Automatic deductions are virtually painless because you never see the cash in your regular accounts when it’s diverted elsewhere. These so-called “payroll savings plans” first become popular in the late 1940s when many banking and payroll systems were entering the early stages of automation.
Cut Down on Unnecessary Spending
What is unnecessary spending? No definition fits everyone but things like money shelled out for tobacco, alcohol, sweets and convenience-store snacks are common offenders. If you smoke, join a local, no-cost cessation program in your community. If you consume more than two or three alcoholic drinks per week, consider cutting down. Do you often pick up candy, fountain sodas, specialty coffee drinks and salty stuff when stopping for fuel at convenience shops? If so, consider yourself lucky! It means you have a very large potential for savings in just one category of current spending.
Most consumers who begin a savings plan discover that this type of discretionary spending is what’s eating up their extra cash. Harness the urge to leak out money on these items and your savings goals will arrive in due time.