What is the best way to save money?
Saving money can be one of the most complicated tasks that we faced or a quite simple one. It all depends on the approach that we take to this subject. In order to make it easier, a well-thought-out plan is needed. That’s why my challenge today is to introduce you to the best way to save money.
Like so many other things we deal with during our stay on this planet, money comes and goes. However, during certain periods it definitely goes more than it comes. So, in order to be prepared to cope with those rough times, savings can be our perfect ally.
Therefore, if you have tried but failed to save money or if you simply want to have some extra tools to enhance your savings, this article is meant for you.
Why is important to save money?
The last couple of years has shown us that one thing we can be absolutely sure of is that life is extremely uncertain. While one day we must think that we have everything figured out, the next day all our certainties can fall apart.
In this volatile world that we coexist, it gets extra important to have some backup to be able to deal with these upside downs. Accordingly, to what we have learned in the article about how to make a personal financial plan, money isn’t everything but it can be quite helpful.
If we have saved money, we can get out in an easier way from emergencies like:
- Loss of work
- Financial crises
- Medical emergencies
- Theft
- Accidents
Also, we would be able to give a hand to our family or friends, if they have to deal with some of these situations. Having some money saved means that in difficult times, we will have one less thing to worry about.
Knowing what it’s important to save, let’s get some tips to spend less money.
5 tips to spend less money
Before we delve into the best way to save money, we are going to review some tips to expend less money and help us have more funds that we can put into our savings accounts. Let’s begin with these 5 tips to spend less money:
- Forget about your credit card. Credit cards can be wonderful when you need to buy something and you don’t have all the money you require. However, they can be really harmful to your personal finances. In return for the service they provide, credit card companies charge you high-interest rates. Therefore, sometimes you will have to be patient and save some funds instead of using your credit card right away. For some readers, this advice may be the most useful.
- Always, pay your debts on time. Sometimes, it is an unavoidable reality that we need to get into debt to cope with our daily responsibilities. However, if we have no other choice, we must be very careful about how we manage our debts. Failure to pay our debts on time means we will be charged penalties. And they are one of the most common forms of losing money.
- Set fixed amounts for recreational purposes. We all need to have fun. That is not in debate. But, if we want to save some money, it is a good idea to plan in advance how much of our funds we are going to spend on entertainment. Setting a fixed monthly amount for such activities would help us to spend much less money.
- Plan your groceries before going to the market. This simple planning can help you save a good amount of money. Arriving at the supermarket with a list means you know what you are lacking and can stick to your needs. When you arrive at the supermarket without knowing what you’re going to buy, the opportunity for “ant-expenses” arises. These are those small spending that we do without really caring, but at the end of the month they add up to a lot of money.
- Bring your own food to work. Are you still working in an office? You have the opportunity to save some money. Not only will you save some cash, but by preparing your own food you are in control of the ingredients. This means that preparing your own food at home can be
- Cheaper
- Healthier
As you can infer, after reading these 5 tips for spending less money, it’s all about planning before you act and avoiding irrational decisions. It may seem less fun or less attractive, but no doubt, your future self will thank you for it.
Saving today to enjoy tomorrow, easy to say but hard in practice
What is the best way to save money?
Having reviewed and understood the 5 tips for spending less money, it is time to learn the best way to save. As there can be as many methods as there are people in our precious world, these 6 steps can help us create habits that will lead to more cash in our savings account.
Let’s dive in.
1 – Track your income and expenses
It all starts here. We need to be extremely conscious of two things:
- How much money do we earn every month
- The amount of money we need to cover our expenses
The first requires almost no explanation. We can simply write down all the money that comes into our pockets each month of the year. In contrast, the second point may give rise to some doubts.
In terms of our spending, it is important that we are extremely precise about how much we spend. If we determine an amount for leisure expenses, it has to be contemplated here. Then, the simple rule comes in. If you spend more than you earn, you are doing something wrong. It’s time to go back to the 5 tips for spending less money and make some adjustments until the balance is positive.
2 – Create a budget accordingly
The moment to put yourself in order has come. You are now aware of how much you earn and what your monthly expenses are. Therefore, a budget should be outlined. In it, you must establish the amount of money that you want to save every single month of the year.
If there’s still some money left, you can plan clever decisions like:
- Increase the amount of saving
- Find some passive income opportunities and save your profits
3 – Pay yourself first
As we already know, psychology is extremely important, and the financial and economic world is no exception. When you receive your salary, the first thing that you should do is:
- Take the established amount for savings and separate it from the rest of your money
This is a way of assuring yourself that you are actually saving money. Waiting until the end of the month can lead to some temptations in the middle of the month and you may end up with no savings in that period. So, first of all, pay your future self, then stick to your budget and everything will work out fine.
4 – Respect the 5 tips for spending less
The key to saving funds is to be consistent. The 5 tips we have seen above are very important for spending less money and having more capital to save each month. If you are not meeting the goals you have set for your budget, you may need to cut some expenses.
To be consistent, you need to have strong habits. These 5 tips can lead you to incorruptible habits that will lead you to a prosperous and less worried life. As always, practice makes perfect. So, after putting these tips into practice, you may come up with new ones that will help you increase your saving power.
5 – Establish a goal and target for your savings
Goals and objectives allow us to stay focused as we move along a path. When we save, we can do it for extremely long periods of time. Consequently, it is very easy to lose focus and forget why we started doing it.
You can set a physical goal, such as saving the amount needed to make the first deposit to buy a house, buy a car or take a nice holiday. But, if there is no specific thing you would like to buy, you can also set a fixed amount of money to be sure that, unless you have that amount, you will not stop saving.
6 – Watch your savings grow
Psychology is back in the article. And get used to it, because it will do so again and again throughout your life. The simple act of watching our holdings grow convinces us that we are on the right track.
The psychological effect of feeling that you are achieving your goals, or getting closer to them, leaves you with a pleasant feeling and convinced of the next steps to take.
Keep tracking your savings amount to achieve your goals.
Consistency and discipline, are the keys to money saving
Last words
Now, we have no more excuses. After reading this detailed plan we know what is the best way to save money. All we need to do now is to put the plan into practice and start saving.
Nevertheless, this is easier said than get it done. It can be hard to establish new habits. When we try to do this, the most important days are the first ones. It’s in those initial stages that we establish a new routine as a habit.
Therefore, stick to the plan, resist temptations and again your future self will be grateful. The journey to achieve your dreams can start with a coin in a jar.