Sometimes the difficult thing of money saving habit is just how you can start the habit itself. It is really very difficult to find out easy ways to save money and how you can use your savings to reach your financial goals. So, let’s discuss few basic tips that can help you to develop a realistic money savings habit.
- Make a list of the expenses
The first step would be figuring out the amount of your spending. Keep track of all your expenses. This may include the cost of newspaper, coffee/snacks, etc. After getting the data, categorize them according to their total amount. You can use your credit card or bank statements as reference.
- Plan a budget
Once you have the idea of your monthly spending limit, you can execute a budget and try to fit your expenses into it. Apart from your monthly expenses, you must also consider expenses that occur often but not regularly. These may include car maintenance cost, home renovation, etc.
- Make a strategy on saving
After planning the budget, try to put away 10–15 % of your income as savings. If you save money every day as well as reduce your fixed monthly expenses, very soon you’ll be able to build up a good saving habit.
- Choose a goal to save for
Try to set a goal. You need a specific target for which you’ll cut off expenses and save money. Figure out how much time you need to save for it. If you need help figuring out a time frame.
These are some examples of short- and long-term goals:
Short-term (1–3 years)
- Emergency fund (3–9 months of living expenses)
- Vacation expenses
- Down payment for your bike or car
Long-term (4+ years)
- Retirement investments
- Child’s education
- Down payment for your new home or any remodeling job
If you’re saving money for your child’s higher education and your retirement fund, then you may invest your money in IRA or a 529 plan. These investments might come come with risks but they also give you good, compounded returns if you plan properly.
- Initiate automatic saving
Almost all banks offer automated transfers between your checking and savings accounts. You should decide the time, the amount , and the account where you’ll transfer the money to. You can also divide your income between your checking and savings accounts. Automated transfers are a great way today to save money as you don’t have to twice about separating money into two accounts manually.
- Keep noticing your savings
Check your progress every month. Keep eyes on your checking and savings account. This will not only help you to stick to your savings plan but it also helps you identify and fix problems quickly.
These easy tips to save money will be very helpful to you and will inspire you to build a good money saving habit.