Saving your money is one of the best things you can do financially. Everybody needs a savings account for a rainy day – in fact, most advisors counsel that your emergency savings should equal 3 to 6 months’ worth of salary. Why? Because life is full of unexpected expenses. A car repair, a job loss, or even an unexpected medical bill can throw you a curveball at any time. Savings can tide you over. Plus, if you want a long-term goal, like a down payment for a house, saving is how you get there.
But saving money is often easier said than done. How can you start to save, especially if money is tight right now? Here are five ideas.
Identify one thing in your budget to cut.
The first thing to do is to sit and go through your monthly expenditures. Chances are, you can find just one item that can be cut. Eliminate that and move the money you were spending to your savings account.
Can you get rid of one pizza night per month, for example? A streaming service? Your favorite latte, at least a couple times per week? Expensive bottled water? The key is to replace these things with inexpensive substitutes, such as home-baked pizza, free streaming services from your local library, home-brewed coffee, and water from the tap.
Put cash in an envelope.
Most people walk around with at least some cash in their wallet. If it’s there, it’s going to get spent, right? That’s human nature. The key is to move it out of your wallet before you spend it!
Many people swear by the envelope method. Simply take a certain amount out of your wallet and place it in an envelope. It can be as little as $5.00 per month – it will add up. After three months’ worth, put it in a bank savings account to get interest.
Save on bills.
Go through your bills to reduce them. Many insurance companies, for example, will lower your premiums if you insure several lines with them (car, home). Insurance premiums can also be reduced by making arrangements to pay a higher deductible.
Can you get a cheaper cable package or cheaper internet service? You likely can if you scout around. If you are paying credit card debt, see if you can transfer the balance to a card with a lower annual percentage rate (APR) and thus lower your monthly payments.
Save on your commute.
Commute costs are a major expense for many people. Are there ways to economize on your commute? If you currently drive, can you carpool with a colleague to save money on gas? Can a family member drop you off? Does your company offer a van service that would cut your expenses? Can you walk or bike when the weather’s right?
If you’re within walking or biking distance from work, walk to bike several times per week.
Automate your savings.
People are prone to save more if their savings are automated. If the amount comes directly out of your paycheck, it’s already earmarked and done. Sign up with a bank or credit union that offers automatic withdrawal every paycheck.
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