By: Dannie Phan | August 25th, 2020
Even if you love your job, the idea of early retirement is music to most people’s ears. But you can only think about early retirement if you have a significant amount of money in your retirement savings account. Are you one of the 230 million-odd Americans who find it difficult to save money? Not to worry! Becoming someone who saves money can be easy. And the quicker you start saving money, the quicker you will see results. Read on for our money-saving tips!
Why Is Saving Money So Difficult?
Saving money is difficult because the rewards are not instant. You have to give up that daily cappuccino, or new pair of sneakers, or the latest video game. For what? Fifty dollars in a retirement account? How long is it going to take to get to $5000? Or even $50 000. It seems like an impossible task. But it isn’t. There are so many tips and tricks to saving money. Choose the ones that work for you. Update your mindset and get saving!
Does Saving Money Make You Rich?
Saving money will not make you rich overnight. However, with persistence, you can build up a tidy little sum. If you invest that money in the right place, you can start earning interest on your savings. That is free money! And with time, it will make you rich. Or at the very least allow you to buy your own home, retire early, or take a trip around the world.
The Advantages of Having a Savings
Learning some great savings skills can help you to save towards a financial goal such as:
- Having an emergency fund
- Retirement savings
- A down payment on a home
How Much Money Do I Need to Save?
A big stumbling block for most people when they first set out on their money-saving journey is not knowing how much to save. If your goal is to retire with a savings account of say $300 000, how is saving $50 per month going to get you there? It helps to spend some time doing research and planning for your savings goals.
Sit down and figure out what it is that you are saving for. To pay off student loans? To put away enough money for a down payment on a house? Then, give yourself a timeline. For example, you want to pay off a $12 000 student loan in two years, that means that you should aim to save $500 per month.
Automate Your Finances
Automating your finances can be a great way to save time and dollars. Set up debit orders so that your monthly bills are taken care of the day that your paycheck comes in.
You can also automate your savings. Decide on what percentage of your paycheck you would like to add to your savings account. Then, put that on an automatic direct deposit too. That way the money is safely stowed away before you even have a chance to spend it!
The Three Rules for Saving Money
The 80-20 Rule
The 80-20 rule or Pareto Principle states that 80% of your results come from 20% of your efforts. This principle can be extrapolated across many aspects of your life. Not just your personal finance.
But what does it mean for you when it comes to saving money? If you have a look at your monthly budget, 80% of your expenditure is likely on things that you buy or pay for every month. The other 20% is spent on one-off purchases like cappuccinos and new sneakers. So, if you want to dive into making big savings, you should look at where you can nip and tuck in the 80% column.
What is the 30-day rule?
Curbing instant gratification purchases can save you a lot of money. If there is something that you want, wait 30 days before spending money on it. You will often find that after one month, the urge to splurge on those noise-canceling earphones is not so strong anymore.
What is the Ten-Second Rule?
To avoid overspending, apply the ten-second rule to any item that you want to place in your trolley that isn’t on your shopping list. Stop for ten seconds. Ask yourself, “Why am I buying this?” and “Do I need it?”
Apps That Can Help You to Save Money
There are a bunch of apps that can help you on your journey to good financial health.
- Figuring out and sticking to a budget is the cornerstone of saving money. Apps such as Mint, Trim, and EveryDollar can help you keep track of your living expenses.
- If you are struggling with credit card debt, the Payoff app can help you pay them off faster and increase your credit score by 40+ points!
- For just $1 a month, Dave can help you outsmart overdrafts by sending you notifications when you are in danger of over-drawing. You can also ask for a no-interest, pre-paycheck, short-term loan of up to $75.
- The Acorns app takes the leftover change from everyday purchases made on the linked card and invests it for you. It is not going to turn you into a millionaire overnight, but it is a great way to get started on your investment journey.
- Stash is another beginner’s investment app that changes your small change into a portfolio of stocks and ETFs.
- If you are fed-up with institutionalized banking, the Varo online bank might be a great solution for you. You can open a checking account, bank account, or high-yield savings account online. No maintenance fees, ATM fees, or minimum deposits for bank accounts.
- Chime is another online-only company. They partner with two banks to offer you checking and savings accounts. No hidden fees and you can get your paycheck up to two days early!
- Aspiration is a financial firm that offers a variety of accounts. Their focus is to reward consumers and companies for environmentally friendly and ethical practices.
How to Reach Your Savings Goals Quickly
How can I save $1000 fast? By making small changes to your daily spending habits. Do you grab a cup of coffee on your way to work each morning? Three dollars a day, twenty times a month – $60. How many times a week do you eat out or buy lunch? You could make a significant dent in your food bill by eating at home more often and packing a work lunch.
1. Turn Off the T.V.
The benefits of watching less television are numerous. You expose yourself to fewer money-spending inducing advertisements. Your electricity consumption will be less. And, if you downgrade your cable subscription, you can lower your cable bill too. With the extra free time you have on your hands, you can get better sleep, learn a new skill, or start a side hustle. These can all contribute to helping you save money in the long run.
2. Cut the Cord
Which brings us to the next point. Why not cancel your cable altogether? There are a bunch of alternatives that could cost you a great deal less than cable TV. There are streaming services such as Hulu, Netflix, YouTube, Amazon Prime Video, the list goes on.
3. Cancel Your Gym Membership
How many times a month do you go to the gym? Is it worth all that money you are paying each month if you are only going once or twice? You could be saving yourself $60 x 12 – $720 per year by canceling your gym membership. There are so many free ways to exercise!
4. Evaluate Your Car Insurance and Home Insurance Every Couple of Years.
Shop around for better deals. Don’t hesitate to negotiate with your current insurance provider if you find a better deal elsewhere.
5. Buy Second-Hand Goods
Buying used equipment, clothing, and second-hand furniture can save you money.
6. Cancel Magazine Subscriptions
Unsubscribe from magazines that you are no longer reading.
7. Cut Your Own Hair
Cutting your hair can be simpler than you think. You can save a lot of money by not going to the hairdresser several times a year.
8. Check Your Cell Phone Bill
Go through your cell phone account to make sure that you aren’t paying for any add-ons or services that you don’t need or can live without.
9. Limit Your Credit Card Use
Keep your credit card in a safe place at home rather than in your wallet. This will curb impulse buys and overspending. While we are on the topic of credit cards, make sure that you are getting the best deal that you can. Compare the interest rate of credit cards from different banks. Be sure to pay off the credit card debt as quickly as you can to avoid paying interest.
Money-Saving Tips That are Good for Your Health
1. Drink More Water
Not only is water cheaper than any other beverage that you will order at a restaurant, but it is also healthier!
2. Order Less Take-Out
Eating at home is usually cheaper than getting take-out or eating at a restaurant. It is healthier for your budget and for you. If you love the socializing aspect of eating out, why not invite a bunch of friends over and do a pot-luck dinner. You will all save money and have fun cooking together!
3. Quit Smoking
Do you fall into the 16% of Americans that smoke? Not only is your habit going to cost you in healthcare down the road, it is costing you a lot every single day.
Simple Ways to Save Money Around the Home
1. Switch Off Lights and Devices When Not in Use
Sure, you won’t save a boatload of money, but it will bring your electric bill down a bit. It is also better for the environment!
2. Change Your Light Bulbs
Using CFLs and LEDs is a great energy-saving choice. They are more expensive than traditional incandescent light bulbs at the outset, but, they last much longer, up to years longer, which is saving you money in the long run. They also use less energy, which means lower electric bills.
3. Install a Programmable Thermostat
If you want to cut down on energy usage while you are asleep or out of the house, this is a no-brainer. You can set your thermostat to heat or cool at certain times of the day so that energy and money are not being wasted.
Another money saver is to automate your water heater to only heat the water at certain times of the day. Better yet, install a gas water heater instead.
4. Buy Quality Appliances
Buying the more expensive appliance when you are trying to save money might seem a little counter-intuitive at first. However, better quality appliances are likely to be more energy-saving and therefore save you money when it comes to running costs. Also, better quality appliances tend to last longer, saving you in the long run.
5. Make Your Own Cleaning Agents
A solution of water and white vinegar is perfect for cleaning windows! There are so many more low-cost alternatives for shop-bought detergents. Have a look online for recipes for making your own cleaning supplies. It will take you just a few minutes, is likely much better for the environment, and will save you a ton of cash.
Tips to Save Money on Your Food Bill
1. Make a Grocery Shopping List
Before you set out for your weekly grocery shop, make a list. Buying from a list will help you to buy only things in line with your meal plan and avoid buying non-essentials and items that might go to waste.
2. Buy in Bulk, Cook in Bulk, Skip the Ready-Made Meals
Items like toilet paper and cleaning agents keep for months. Buy these in bulk to save extra cash.
If you have a freezer, buy meat and other consumables in bulk when you find low-cost deals. When you cook a casserole or a batch of spaghetti and meatballs, make a quadruple batch. Pop the other three portions in the freezer. Now you have some quick-fix meals for those days when you just don’t have the time or energy to cook from scratch.
3. Make a Meal-Planner
Spending a few minutes at the beginning of the week to put together a meal planner will save you time, money, and stress. Even better, have a look at your grocery store’s flyer while you do it. Plan your meals around the items that you can buy on sale. Try to stick to seasonal fruit and veg. These almost always cost less money than out of season goods.
4. Coupons and Rewards Credit Cards
Gather coupons for items that you regularly buy. If the store that you usually purchase your groceries from has a rewards gift card, sign up to gather points or discounts for your shopping. These points can then be traded for gift cards (free money) that you can use to buy other items.
Even better, use a grocery couponing app such as Shoply, Ibotta, or Checkout51.
5. Try Out Generic Brands
Very often the generic versions are just as good as the brand-name ones. The next time that you go to the store, try the generic versions instead. This will help you reduce your monthly grocery bill.
More Easy Money Saving Tips
1. Swap Books and DVDs
Instead of buying new books, CDs, or DVDs swap them online. Or become a member at your local library. If you can borrow or barter books and DVDs, you will save a good bit of money over time.
2. Make Your Own Gifts
Making homemade gifts for your friends and family members is a great way to save money and give something truly meaningful at the same time. You can make home-made granola, fresh baked cookies, candles, soap, the list goes on!
3. Give the Gift of Time
Instead of spending money on gifts, offer your time as a gift. You can pet-sit for friends when they go on vacation, or offer to walk their dogs. You could also offer babysitting services to friends with children.
What is the Best Way to Save Money?
There is no one best way to save money. Slow and steady wins the race! A good savings account grows with small lifestyle changes and regular deposits. The best way to save money is the way that works best for you, and whatever you find easiest to do or change about your current lifestyle. If it is too difficult, chances are that you will throw in the towel before you see the true rewards of a good savings plan.
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