A new year often means a new focus. You might resolve to lose some weight, get to the gym more often, spend more time with family or save more money. While some of these goals tend to fall off your to-do list as you get busy, saving money shouldn’t. Having a healthy cushion in your savings can help if you face an unexpected financial downturn.
Market uncertainty can lead to layoffs, and accidents can happen to anyone. Without a healthy savings plan, you could be facing severe financial problems. There is a lot of advice out there about savings, but few experts agree on a final percentage. Sen. Elizabeth Warren recommends 20 percent of your income, but there is no one-size-fits-all number. Younger people can save less to reach financial freedom over a longer period of time.
Remember that reaching financial freedom is all about a percentage of savings. When you work on your budget, start with an idea of when you’d like to retire and what your expected income will be. After all, you’re likely to have less financial freedom after retirement, but with careful planning, you can have enough put by to retire early and live comfortably. You have to save money to reach your goals.
How to Save Money
Saving money starts with a very simple concept — spend less. The less you spend, the more you save. Your regular expenses can get out of control in a hurry. By setting strict controls over what you are willing to pay for living expenses, practicing good saving habits and implementing a more frugal approach to life, you can start saving money, fast.
How to Be Frugal
Spending less doesn’t mean being cheap, but it does mean taking a frugal approach to purchases. Before buying, you want to be cautious. Consumers already tend to read online reviews and run product searches before spending, but you can take things a few steps further and save money faster. Here’s a few tips for frugal spending that will help save you money.
- Shop extensively. When you need to make a purchase, avoid buying from the first vendor you find. A quick search can show you plenty of places to make a purchase, often at a discount.
- Check for coupon codes. Coupon codes can routinely save buyers at least 5 percent on a purchase and often include free shipping.
- Don’t be afraid to buy used. Buying something brand new can be a big investment, but refurbished or gently used products can offer similar value at a dramatically reduced price point. In some cases, you can even get a product warranty.
- Cut back on luxuries. Eating out can be a fun, social experience, but it comes with a surprisingly high price tag. In 2015, American spending at restaurants exceeded spending at the grocery store for the first time. Given that the average American adult eats out 5.8 times each week, and a recent Zagat survey puts the per-person price at $39.40, simply eating at home more often can be a very frugal choice. Eating at home one extra meal per week can add up to more than $2,000 in savings per year.
How to Save Money Each Month
Cutting back on some of your biggest expenditures doesn’t always translate into an increased level of savings. To see the best results from your increased frugality, make arrangements for automatic savings. You are much less likely to spend money if it never enters your checking account. Some companies offer split payroll, where you can have your direct deposit automatically split between your checking and savings account. You can also up your 401(k) match to compensate for the extra funds in your budget.
If your employer doesn’t offer these options, no worries. Your bank does. Your bank will let you set up automatic withdrawals from your checking to your savings. A small CD account can be a good way to get started, as it can impose penalties for early withdrawals. It’s also one way that saving makes money in interest. By making savings automatic, you learn to work with the funds available and avoid thinking about savings as “spendable” cash. When you’ve got things to save up for, this is a great way to start putting money aside.
10 Ways to Start Saving
When you want to get started on a savings plan, sometimes it is easiest to start with small, simple changes. Even pennies add up over time. Here are a few tips to help you get started on your journey to financial freedom. Follow some or all of these tricks to save money this year.
- Say goodbye to paid TV. Cable television, satellite dish service or any other pay television service is a luxury. By switching to affordable subscription services like Netflix, you can keep up with all of your favorite TV shows, but usually a season behind the original air date. Waiting a few months can help you save hundreds of dollars each year.
- Invest in energy savings. Energy-efficient light bulbs and appliances can help reduce your monthly utility bills. This simple switch can net a real annual savings that doesn’t cost you anything in daily use.
- Adjust your thermostat. A few degrees difference on the thermostat can rack up considerable savings on your electric bill. Heating and air conditioning are some of the most expensive utility costs in a home.
- Install insulation. Preparing your home for winter with the right window treatments and adding weather stripping can help keep your conditioned air on the inside. No one wants to waste money heating or cooling the outside.
- Turn off the lights. Don’t leave the lights on when you leave a room. A quick stop by the light switch can really help with an out-of-control electric bill. If there is no one in the room, there’s no reason to have the lights on.
- Brown bag your lunch. You know the high cost of eating out, so take the time to pack a lunch and cut down on the restaurant costs. A few little steps toward preparing more food can help you get good with money.
- Get creative with your savings. Some more creative ways to save money might include making “phantom” purchases. Remember that new purse you didn’t buy? Deposit the money into savings as if you did. Do the same any time you avoid a purchase you might have made before your new savings plan.
- Cut coupons and use sales. You can save big on your grocery bill with coupons, store offers and match programs. Couponers can save more than $1,000 per year.
- Look at value, not price. One of the big mistakes many people make is assessing a purchase based on the cost, not the value. Some major purchases can actually save you money in the long run. It might cost a bit more to invest in new kitchen appliances, but if it helps you cook at home more, it’s a big help.
- Make a realistic budget and stick to it. Sure, budgeting is not exactly a fun way to spend your day, but it can definitely help you get control over your spending. Look at your bank statements and receipts for several months. You can’t budget effectively unless you know where your money is going. Once you’ve seen where your spending goes, you can develop money saving strategies that work for you.
Saving money is a very personalized process. Maybe you don’t eat out a lot, maybe you’ve never signed up for cable TV. Your money-saving ideas should start with a look at your spending. No two people have the same spending habits. When you resolve to save more money this year, take consistent, small steps and see how well you can do. The longer you save, the bigger your balance and the more motivation to keep that New Year’s Resolution.