Have you ever thought about how those little expenses you indulge in add up over time? Most people don’t, and this is why they don’t maintain an adequate financial cushion in their savings accounts. Living from paycheck to paycheck is the norm, but a crisis can create a huge setback if you’re ill-prepared. Learn how sacrificing for just a year can help you financially stay ahead in the long term.
Develop a Budget & Stick to the Plan
A budget is like a map that is designed to help you navigate your personal financial journey. This map will let you know:
- How much you’re spending
- What things you’re spending your money on
- How you can cut those expenses
- Whether or not your spending is on track
Developing a budget is the most crucial part of your savings strategy. If you don’t have a budget, you’ve got no way to measure whether your savings strategies are working. If you need help, you can sign up for a service like LearnVest, which will help you develop a budget and stick to it.
Cut Non-Essential Items and Unnecessary Fees
Once you’re tracking your spending and savings over time, you’ll start to notice patterns in your spending. Perhaps you’re renting movies from Redbox and incurring extra fees because you forget to return a movie. You may be spending money for lunch out when you’re working when you could be getting by on leftovers. Maybe you like to eat out a lot. These little expenses can add up over time and affect your bottom line. Cutting things like cappuccinos, lunches, eating out, movie rentals, and other similar activities can save you a lot of money over the course of a year.
Always Pay Yourself Before Paying Other Expenses
It’s much easier to put a few dollars in a savings account before you start spending than trying to scrape together enough to put into savings after you’ve spent all available funds. Consider your savings an important expense like rent or mortgage. After all, your savings account will be your shield against future financial dilemmas. It would be wrong to put off paying yourself, because you leave your finances vulnerable to future unexpected expenses.
All it takes is a little bit of determination and a modicum of self-control to build up our savings. Having a sizable savings can help you weather financial pitfalls such as unexpected car repairs, illnesses, and other surprise expenses. One year of making a few sacrifices can help you pad your savings account with enough cash to help you avoid living the same rat race everyone else is when they try to survive on one paycheck at a time.