Many Americans are one paycheck away from going into debt to pay for an emergency. A report by the Federal Reserve on the economic well-being of U.S. households found that 40 percent of American’s can’t afford an unexpected $400 expense. Having some extra cash can help you be prepared in case financial disaster strikes.
There are many different ways to save money – some easier than others. Pick what works for you and stick with it for a few months, setting aside the money that you save in a separate savings account. You can use the extra money to start an emergency fund or invest for retirement.
Don’t let saving money intimidate you or fill you with dread. Many of the changes below will not only save you money but increase your quality of life. Choose three to five tips from the list and focus on those until you’ve mastered them. This way you don’t get burned out and quit before you’ve seen any real savings.
Here are a few of the easiest ways to start saving some real money.
If you don’t have a good handle on your finances, this is an important first step toward saving money. You need to know where your money goes before you can start saving. Pull up the last three to six months of bank and credit card statements and jot down general expense categories.
If you’re not sure where to start or just need an extra nudge, talk to a financial advisor who can help get you on the right track. Getting a full financial picture will help you set goals for the future and decide how to allocate your income. Without a clear guide, you’re bound to spend money aimlessly, constantly asking yourself where all of it went.
Once you have a general overview of your finances and where your money goes, it’s a good idea to draft a budget. While budgets get a bad reputation, they really are just a spending plan. This helps you tell your money where to go rather than wondering what happened to your paycheck at the end of each pay cycle.
Draft a budget that puts your priorities at the forefront and allocates your income accordingly. Keep in mind that this requires making trade-offs. If you want to spend more money traveling, you may need to cut back in other areas such as groceries or your daily coffee habit.
The key to drafting a budget that you will follow is to focus your spending on the areas that provide the most value to your life and cut back on everything else.
If you still have debt such as student loans or a car loan, focus on putting extra money toward paying them off. Having extra debt besides a mortgage can feel like a heavy weight around your neck. Don’t get complacent making only the minimum payments. Attack the debt head-on and put any and all extra money toward paying it down.
As you pay off one debt, roll that payment into paying down the next one on your list until you are debt free. Having a clean slate will make you feel much lighter and also open a large surplus in your budget. All the money that was going toward paying down debt can now be used to save and allocate toward your goals.
If you haven’t started a retirement savings account such as an IRA or a 401(k), get started as soon as possible. Don’t push it off toward a future date thinking you still have time. The younger you are when you start saving, the longer you have to take advantage of the magic of compound interest.
If your job offers a 401(k) match, make sure to contribute the maximum required to get the match. This is free money that will continue to grow in your account for decades to come after you leave your current company.
Studies show that once you start contributing to your retirement account, you’ll continue to do so by inertia. Do yourself a favor and call the retirement plan administrator at your job today to get started.
Don’t rely on your own willpower to save money. We’re all human so making savings a priority is difficult. Take the decision out of your own hands and just automate the process. Setting it up is pretty easy and it means you’ll have one less thing to remember and do regularly.
Check with your Human Resources department to see if they offer the option to split your check deposit into two separate accounts. If they do, have a percentage of your paycheck deposited at a savings account while the rest goes to your checking account.
I would recommend opening an online savings account. Not only will this make it harder for you to access the money, but you’ll also get a much better interest rate as well.
If your HR department does not offer the option of splitting your check, you can set it up yourself. Each payday set up an automatic transfer of a set amount from your checking into your savings account.
The quicker the money disappears from your checking account, the better. This way you will only see what’s left and use that for spending.
When it comes to saving money on food, there are many different ways you can lower your bill. The most important part is to be intentional with your spending and try different tactics until you find what works for you.
One of the easiest ways to save money on food is by making a meal plan. Each week sit down with your planner or calendar and brainstorm what you will eat each day. Check with your schedule to see what activities you have going on that may affect what you eat.
Make a tentative meal plan for every meal that week and jot it down. You don’t have to stick with it closely – feel free to swap meals around if something works out better on another day.
Just having an idea of what you’ll make and eat will help you only buy the ingredients for what you need. Make a shopping list based on the ingredients that you need for the week so you can be prepared when you go grocery shopping.
Another easy way to save money is to plan your meals around what’s on sale. To see what’s on sale at the stores in your area, check out each store’s weekly ad. Those can be found usually on a store’s website or at the store itself.
Browse through the ads to see what produce and meat is on sale and use that to build your meal plan for the week. By shopping what’s on sale, you’ll not only save money but eat fresher food. Fruits and veggies that are in season are usually cheaper and fresher than out-of-season produce.
Have you ever gone to the store for milk and bread and come out an hour later with a cart full of groceries? When you go to the store to pick up a couple of essentials, it’s easy to get sidetracked and end up buying things you didn’t intend on purchasing originally. Stores are masters of getting you to spend money so don’t think it’s all on you.
One of the easiest ways to save money at the store is to make a shopping list. Make grocery shopping deliberate and sit down to write out a shopping list based on your menu plan. Check your fridge, freezer, and pantry to see what you’re running low on or out of completely.
Once you have your list ready, check it twice to make sure you haven’t missed anything. This is an important step because once you go to the store, you’ll only buy what’s on your list. No exceptions.
If you pass by the dairy aisle and realize you’re out of cheese but it’s not on your list, keep walking. This will save you from impulse purchases since they’re not on your list.
Another easy way to save money on food is by buying some generic foods. Switching to generics can save you a big chunk of change, so give it a try. The easiest generic products to start with are canned tomatoes, canned veggies, and meat.
Next time you’re at the store, look at the lower shelves for generic versions of the brand-name items you were planning to buy. Pick a couple to try - you may even like them better than the name-brand equivalent. In many cases, there’s not much of a taste difference.
Instead of eating out for lunch every day, do your wallet and waistline a favor and bring your lunch a few days a week. You can make a sandwich, bring leftovers, or buy frozen meals next time you’re grocery shopping. Either way, you’ll end up saving hundreds if not thousands of dollars a year by eating out less.
If you’re a fan of soda and juice, switching to water for your beverage of choice can save you a big chunk of change. This also goes for your morning cup of java if you pick it up on your way to work.
Brew coffee at home and take it with you in a to-go cup. Swap out soda and juice for water and watch the savings roll in.
Another area ripe with opportunity for saving money is transportation. There are many different ways to get around; picking one of these alternatives is sure to cut back your cost of commuting.
If you live in a big city and have access to public transit, consider this as an option of getting around, at least part of the time. Check out the cost of public transit and look at potential routes for popular destinations such as work. Some employers even offer discounted transit passes to employees so check with your Human Resources department if they offer the perk.
Do you know a co-worker who lives close to you? This could be a good option to carpool since you’re already going in the same direction. You can alternate who drives each week or have one person drive while the other reimburses gas expenses. If your spouse works close to you, this is another option for carpooling.
This idea won’t work for everyone but if you live in a city with great public transit, there’s really no reason to have two cars. If you can get rid of one of your vehicles and become a single-car family, this will significantly cut your transportation expenses. Consider using some other options such as taking public transit or carpooling.
Review your car insurance rates every year to ensure you’re getting the best rate. If you stay with the same insurance company, rates can increase over time.
Run a comparison once a year to see if you can find a better rate with another company. You may be able to save hundreds of dollars a year just by switching insurance companies while maintaining the same coverage.
Housing is likely the largest expense in your budget. Here are some tips and tricks to lower the cost of keeping a roof over your head.
If you’re looking to buy a new house, consider scaling down your current “must have” list to include smaller homes. There’s no reason to pay for a large home if you’ll only use a few of the rooms on a regular basis.
Find a home with the right number of rooms that you’ll use every single day – and nothing more. This will save you a lot of money on furnishings, maintenance, utilities, and much more.
If your utility bills are high or your house is older, adding insulation will help. Look at adding insulation around windows and doors and plugging in any holes where air leaks through.
Another good place to add insulation is in your attic. This is especially helpful in preventing the hot air from escaping during winter months.
Older appliances can be huge energy hogs. If you’re planning on buying a new fridge or washing machine, look at energy efficient models. They use less energy and less water without compromising performance.
Depending on your living situation, getting a roommate or renting out a room may be a good option for saving money. If you have a finished basement that can be converted into a separate apartment, this can be another option for extra income. Renting out space you don’t use can help you pay down your mortgage faster and provide additional income.
If your electric bill rivals your car payment, it may be time to review your energy usage. Doing an energy audit can help you spot energy-hogging appliances and identify areas where you can add insulation.
Put the thermostat on 78 in summer and 68 in winter. Take shorter showers and lower your water heater to the energy-saver setting (usually 120 degrees on most water heaters).
Looking for more ideas on easy ways to save money? Here are a few general tips and tricks to cut back on your spending.
Impulse purchases can quickly drain your wallet, leaving you wondering where the money went at months end. An easy way to combat that is by instituting a 30-day waiting period for anything more than $100. You can even set the limit to $50, depending on what works best for you. This way you have some time to make sure this is something you truly need before spending the money.
If you’re spending a lot of money on entertainment, consider finding some free but equally fun things to do around town. Many cities offer free entertainment such as outdoor concerts or festivals. Consider going hiking with friends or to the dollar movie theater.
Dining out can be a tough habit to break. However, with a little advance planning, you can significantly cut back on how much money you’re spending on food outside the home. Make a meal plan and cook at home so you know what’s for dinner every night.
Prepare your lunch and bring it to work several days a week for further savings. Invite friends over for a potluck instead of going out to dinner.
The first step in saving money is to get your finances in order. Knowing where your money goes every month and making a long-term financial plan every month will help you sleep better at night.
Talk to a trusted financial advisor about your financial goals and work on a budget that fits your lifestyle. Use some of the tips above to save cash without feeling the pinch and use it to pay down debt and save toward your goals.
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This is a post from Clint Haynes, a Certified Financial Planner® and Financial Advisor in Kansas City, Missouri. He is also the founder and owner of NextGen Wealth. You can learn more about Clint at the website NextGen Wealth.
NextGen Wealth, LLC is a registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities product, service, or investment strategy. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, or attorney before implementing any strategy or recommendation discussed herein.
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