Saving money on a tight budget might be one of the most difficult things to do in our consumer-centric culture. Every day individuals are bombarded with ads in every direction encouraging you to buy, buy, buy. It is possible however to save money without eating like a broke college student (even if you are one.)
As a quick overview, the first step is to implement a strategy that is achievable. To do this, you need to look at your expenses and create an accurate budget that you can stick to. If you are not sure where to start, you have come to the right place. It is easy to get overwhelmed and maybe even frustrated when thinking about a budget and all the expenses you may have. Following these steps may help you realize it might not be as overwhelming or complex as you may think, even if money is tight.
- First things first – track your expenses
Before you do anything else, you have to get a baseline, and you have to know where you are starting, and how much money you have spent in the past couple of months. It might not be pretty, but this step is necessary to see so you can identify any areas you may or should cut back on. There are tools online to help you do this, or you can track it manually. It is best to categorize your spending habits, so you can break them down quickly and see any problem areas.
- Goals, goals, goals
If you decided to read this blog, there is probably a reason you want to save money. You may want to buy something special for yourself, pay off debt, save for the future, or create a generosity strategy. No matter what the reason is, you have goals in mind and it is important to set short, mid, and long-term goals to achieve them. These goals need to be realistic, or the task of saving for them will appear daunting.
A short-term goal could be saving money for a plane ticket over the next three months or setting aside for an emergency fund in a specific timeframe such as six months.
A mid-term goal will most likely be loftier in nature and goals in this timeframe are often realized in 12 to 36 months. An example of a mid-term goal could be saving for a down payment on a house in order to avoid PMI (Private Mortgage Insurance).
Long-term goals should have reasonable starting values that accumulate over time. Meaning, your plan is forecasting out for possibly a decade or more and the amount your saving is accumulating with both the contributions and expected growth. Some examples include saving for your child’s college and retirement.
It is essential to have all three categories in your plans. It is also important to celebrate the wins of each as you reach your goals.
Writing out your specific goals and putting them somewhere visible will help remind you and drive you to achieve them. If your goals are simply in your head, you may lose track or forget and have to start all over again. Creating a vision board or list will help you achieve your goals quicker and more efficiently.
Setting a budget can be intimidating. What is important is to take a look at your spending and set limits for yourself. The most important aspect of developing a budget is to be realistic. For example, if you spend $600 a month on groceries, don’t set your grocery budget to $200. That would require a huge lifestyle change that most likely will not happen. It is also important to distinguish between your needs such as groceries, cell phone, utilities, housing, etc. as well as wants. Wants are important and help us enjoy life however wants also have a way of throwing off monthly spending patterns. It might take some time to develop a budget that works for you but be patient and stick to your goals. Budget isn’t a bad word. It quite frankly should be a best friend.
- Stashing Savings
It is important to be smart when thinking about savings. While most people keep typical savings accounts with their bank, you may also want to consider a high-yield savings account which would allow you to access your savings while also earning interest easily. Finding an account that offers a higher percentage APY than what is traditionally earned in a savings account is recommended. This type of account is great for an emergency fund or even a vacation stash. You could also look into a CD or certificate of deposit, which would earn a higher interest; however, CDs come with a fixed maturity which means if you put your money into a five-year CD, you cannot access it before the five years without penalties and fees. Whatever you choose to use for this account, know the fees and expenses and make certain it is easily accessed without penalty.
Here are some quick tips to save you money!
- Switch to a fee-free bank account – If you were to overdraft once a month, you’re giving up an average of $360 in fees every year.
- Try to get a lower interest rate on your credit card debt, and some credit card companies will lower your rate by simply calling them.
- Consider switching from cable to one streaming service, there are many options today in streaming services, and they all start at reasonable rates.
- Check your bank statements for any subscriptions you don’t need or don’t use anymore. They can be sneaky, and you may not realize what you are still paying for! They all add up.
- Make a shopping list for the grocery store and stick to it! You might be surprised how much money you save by sticking to your list and not buying items because they look good. And remember, don’t go shopping on an empty stomach.
By focusing on your specific goals, setting your budgets, and sticking to them, you can achieve great things. If you are ever ready to dig deeper into financial planning, we are always here and happy to help. At Awaken Wealth Partners, we are passionate about helping you reach your life goals. We like to work a little differently around here. We like to meet with you to discuss your goals, fears, and dreams and then develop a viable plan to reach them. We are here to be a valued partner and advocate to help you plan your future.
Working with us also looks a little different than you might be used to. While reading blog posts may be a place to start on your financial journey, taking the next step with us means receiving detailed deliverables with action steps, check in’s, reviews and adjustments when needed.
We communicate with you on your schedule and per your desired line of communication. All in the hopes to help you stay on track and to achieve your goals.
We are here to help you, so let’s plan the life you want to live.