We all know how important saving money really is to achieve financial wellness. But how many people are saving money to meet their future needs? If you look at headlines, you’ll come to discover some startling statistics.
- 47% of Americans would have trouble finding $400
- 2/3 of Americans would struggle to cover $1,000 crisis
- 1 in 3 Americans has saved $0 for retirement
Do you find yourself as part of those statistics?
I’ve heard many reasons why people don’t save. The one reason that sticks out the most: “banks don’t pay much on savings accounts so it’s not even worth it for me to save money.”
My argument to that line of thinking has been: savings is meant as a safety net to give you security for unexpected events. You need to save in order to lessen the impact of these events and to achieve goals.
Another reason I hear why people don’t save is a belief they don’t have enough money to save. Or simply put, they don’t make enough to save. Well, let me tell you everyone can save money. And I believe you can save money.
If you’re spending everything you earn, then you’re right you can’t save money. Saving money must become a priority for you. Here are useful tips to help you prioritize savings and build a positive savings habit.
Pay yourself first. This is one of those personal finance rules you’ll hear repeated over and over. There’s a lot of truth to this financial tip. Every payday you must pay yourself first. You pay yourself first by transferring small amounts of money into a savings account. Start with a rainy day fund. The amount you transfer can start at $10 and adjust as you change your spending habits.
Automate your savings. Make your life easier and automate how you save money. Make sure you elect to have your paycheck direct deposited into a checking account. Open savings accounts with the same bank or another financial institution. I suggest setting account titles to visualize what you’re saving towards. Then, set automatic transfers for each payday. Every time you get paid, the amount you set will be automatically transferred from your checking into your savings accounts. I wrote about how to set up automatic savings in detail in my book, You Only Live Once. Additionally, New York Times bestseller David Back wrote a great book called the Automatic Millionaire that shares how one simple rule can help you achieve your financial goals.
Find money to save. Start by reducing the amount of money that is going out. Cut your expenses and lower your monthly bills. You can do this by canceling or negotiating for better terms. Consider looking for alternative services too. For example, when you reduce your cell phone bill by $10, you now have $10 to put into a savings account. Additionally, look at ways to increase income. Ask for a raise at work or start a side hustle to earn or make income.
Have a budget. You’ve heard this before and budgeting doesn’t seem at all fun. But it can be when done correctly. Budgeting helps you allocate your money to things you value. It makes you more accountable. When you know how much money is coming in and where it’s going, you’ll make better spending decisions. A budget doesn’t have to be complicated. Remember, a budget is how you’ll spend your money today and how much you’ll save for future expenses.
How to use budgeting to save more money
The budgeting process is the best tool to help you identify how you’re spending your money and where it’s going. Budgets are often associated with limiting one’s ability to do things, however, budgeting helps you allocate your limited resources to things that actually matter.
The budgeting process can be tedious but extremely helpful in managing money and reaching financial freedom. Here’s how to use budgeting to find money in your current situation.
- Calculate your income and expenses.
- Make a list of all income sources and calculate the total monthly income.
- Keep a record of one month’s fixed expenses and discretionary spending.
- Organize based on categories and total expenses such as housing, transportation, food, utilities, credit card payments, etc.
- Using paper or a spreadsheet, calculate your income compared to your expenses.
- Analyze the results and calculate how much you can save and how much more you can pay towards your savings goals.
- Determine where you can decrease fixed expenses and cut spending to free up money.
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