How To Start Saving Money The Right Way

personal finance Oct 07, 2020
How To Start Saving Money The Right Way by TTM Education

Saving money seems like an impossible task for most people, especially if you live paycheque to paycheque. How can you save up extra money when you can barely pay your bills or when you have just enough money to pay for the things you want? Will savings ever be a possibility?

Fortunately, it’s easier than you think to save, it just takes a few careful and consistent steps to get started.

  • Know your Ins and Outs

Do you know how much money you bring in each month? You might, most people know how much money they make. But what about how much goes out? 

That’s a different story. Most people don’t want to know how much they spend, so they ignore it.

If you’re going to do this right, you need a clear financial picture, which requires budgeting.

Pull the last few months of your bank and credit card statements to see how much you spend. Categorize each expense, creating categories such as housing, food, utilities, shopping, entertainment, and transportation.

Look at the categories that you overspend. You’ll spot them right away. This is where you’ll focus when you move to the next step.

  • Figure out Where to Cut Back

Now that you know your expenses, figure out where you can cut back. Here are a few good places to start:

  • Coffee shop stops
  • Grooming (nails, facials, and excessive hair appointments)
  • Shopping sprees
  • Memberships or subscriptions you don’t need
  • Cut the cord on cable
  • Eating out
  • Entertainment

Choose a few areas where you can cut back but won’t feel like you have to sacrifice. Keep track of how much you save changing these habits and put that money aside in your savings account.

Once you get used to cutting back in one area, add another and keep the train rolling until you are saving more than you ever thought possible. 

  • Automate your Savings

Even with the best intentions and cutting back, many of us forget to save. Make it automatic so this doesn’t happen.

There are two ways:

  • Set up automatic deposit from your checking account – you can set up weekly, bi-weekly, or monthly transfers
  • Set up direct deposit with your employer, sending some of your paycheque to your checking account and some to your savings account.

    Don’t be afraid to open a savings account at a different bank. A high yield savings account is best. You’ll find many options online, which makes it harder to access your funds, letting the money grow.

Remember, as you find more ways to save money, increase your automatic transfer to reflect the changes. 

  • Find Other Ways to Save

Once you evaluate your spending, look for other areas you can save. A few common places include:

  • Insurance – When’s the last time you shopped for your insurance? Staying with the same provider may seem easier, but it often costs you more money. Insurance companies offer lower rates to attract new customers. Once they have you, they gradually increase the premiums and most people don’t pay attention. You may save a few hundred dollars a month, but you won’t know until you try.
  • Credit card APRs – If you pay your credit card bills on time, your credit card company may lower your interest rate, but only if you ask. The worst they can say is ‘no,’ and if they do, look for other credit card offers, such as 0% APR balance transfer cards. You could save hundreds on interest.
  • Refinance your mortgage – Interest rates are at all-time lows, so why not take advantage? If you refinance just to get the lower rate, you may save a few hundred dollars a month.

Keep track of any money you save and put it aside. Don’t ‘grow into the expenses’ by increasing your lifestyle. Instead, immediately transfer the funds to your savings account and let the funds grow.

  • Cut your Grocery Expenses 

It’s easy to overspend at the grocery store and not realize it. Pay close attention to your food expenses over the last few months. Are you shocked at how much you spend? You’re not alone.

Try meal planning to save some money. Plan for a week, two weeks, or a month, but plan your meals around that week’s sales and coupons. Avoid buying anything that isn’t on sale. When your staples go on sale, stock up so you never have to pay full price. 

Use coupons as much as you can and only shop from your list – if it’s not on your list, don’t buy it.

  • Cut the Cord

Even if TV is your release, you can cut the cord and find alternatives. Cable bills cost an average of $150. Cut the cord and buy a streaming service for a fraction of the cost – usually around $15 a month. Just cutting the cord can save you more than $1,200 a year.

  • Sell your Unused Belongings

Do you have stuff lying around your house that you don’t use? Make some cash on it by selling it on Craigslist, Facebook Marketplace, or even eBay. You’d be surprised at how much people pay for certain items. Put the cash you make right into your savings account so you don't spend it.

Are you Ready to Save the Right way?

Saving isn’t as hard as it seems. All it takes is a few simple changes in your life that after a while become an old habit. At first, you may feel like you’re sacrificing or that it’s too hard, but stick with it.

Even a few changes could add up to $1,000 or more in your savings account in a short while. That’s a perfect start to an emergency fund – the next step is saving 3 to 6 months of expenses for the most financial stability.

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