I might bump into a personal finance blog or article that emphasizes the importance of cutting back on your expenses as much as you can or give up certain items you spend on a daily basis. They usually back up these articles with some stupid BS statistic like "if you spend $900 for the latest iPhone every year and not place it in an index fund, then in X amount of years, you would have lost $X." Truth is, while it does sound like phenomenal advice, it certainly is tiresome to prevent yourself from purchasing your daily coffee or perhaps on purchasing the latest iPhone if you really enjoy purchasing the latest gadget.
Related: 6 Simple ways to save money
While this article is similar to 6 ways to save money, I felt the urge to update a few things, elaborate on how you can approach such tips, showcase new readers how to save that money, and show you my personal examples.
1. Write down your goals
When it comes to saving your money, always have a goal or reason to save the money. Aimlessly saving your money just because some blog site told you to save or having no reason to save will only create lack of focus.
If you know you're about to purchase a laptop, a new fridge, furniture, a car, anything that is relatively expensive, search and find the item you'd like, look at the price tag, and set yourself an attainable time frame, as well as the amount of money you will place to the side, in which you will have sufficient amount of cash to purchase the item. The same is applicable if you know you're about to travel or take a week off.
For me, hosting this site costs me around $216 a year, if you're living paycheck to paycheck, it can be hard to have $216 in hand. Create a goal, in this case, $216, and figure out the time frame you have to reach this amount of money, in this case, a year. If I save only $18 a month and place it in a savings account, then I'll be sure to have $216 by the time I need to pay for my hosting bill.
FinCon, an event that is fairly expensive, from purchasing passes, to hotel costs, transportation, food, etc. The passes for all 4 days costs $299, the hotel where FinCon has their discounted rate, for 5 nights costs about $900 (and that's the discounted rate) a flight to Orlando will be about $400, food will be around $200, all comes to a grand total of "this is really expensive, is this even all worth it?" Or $1,799 unless FinCon or some company wants to pay for the majority of my expenses, I will be grateful :). Nonetheless, in order to save a sufficient amount, I need to save around $257 a month before September.
2. Adjust your budget
Of course, it's not possible to have $257 out of thin air by the end of the month, you'll need to make some adjustments. And no, I don't mean to cut out things from your budget completely. Rather, be more intelligent and self-aware on where your money is going.
- If you have other savings goals, prioritize the one that is approaching first or the most expensive.
- Find expenses that you will be able to cut back on:
You might have a monthly subscription for both Hulu and Netflix, but you find yourself using Netflix a lot more than Hulu, if you're okay with it and won't feel as if it's the end of the world, then suggest unsubscribing from Hulu. If you purchase physical books, consider switching to ebooks only if you feel comfortable from reading on your tablet or phone. Do not give up on the things you enjoy purchasing on a daily basis, but find expenses that you aren't utilizing to the fullest extent and consider cutting it out from your budget.
- Increase your income by having a side hustle or investments that make you money
- If you have any debt, be sure to pay it off:
While it seems as if you're wasting money by paying off debt, it helps you in the long run and saves you money in the future. As the interest you pay on your loan or credit card won't be as high as it would be if you wait to pay it off in the future.
Related: 6 Ways to make more money
As you all know, I can't give up on eating out, purchasing physical books, or purchasing 7/11 coffee. So instead, to save money on other expenses/areas, I don't own a Netflix account, but rather borrow one, I purchase clothing at a discounted rate, only buy 2 pairs of shoes every year. To reach my goals on purchasing and affording my FinCon trip, I might have to invest less and place the cash I would have used on the side, as it's okay for me to not invest for awhile since I have many more years and opportunities to invest in my brokerage accounts.
3. Renegotiate your bills
As you view certain expenses on your budget, figure out which ones you can renegotiate. Perhaps you've been a loyal customer to your internet provider and would like to pay less on a monthly basis and allocate the cash you would have used to pay the internet bill to save for your goal. Simply pick up the phone, call their customer service line or the representative in charge of prices, and talk them into bringing down your monthly bill.
I don't have too many bills to worry about, aside from my credit card, phone, and internet bill. There is no reason for me to renegotiate what I pay for. $60 a month for 2 lines, a $29.99 monthly payment for my internet. It can't get any better than that.
4. Place your savings in a high-interest savings account
Right, so you have your goal, you adjusted your budget, and renegotiated your bills to pay bills at a cheaper rate. It's time to start saving. Always have separate savings account from your checking. Never have your savings account in the same bank as your checking account, but rather in a completely different bank. Simply to prevent you from transferring your money from your savings to checking account and spending your saved money. There are many pros to having a high-interest savings account, a majority of these accounts do not have any monthly fee of any sort, they, of course, provide a high-interest rate in comparison to other banks.
Capital One 360 accounts currently provide 1% on your savings account, Ally bank provides 1.45%, American Express savings provides 1.45%. It certainly beats the rate of a Bank of America or a Wells Fargo which is a small 0.01% rate. Below you have the interest paid overtime with a 1.45% interest rate and a 0.02%. Allow me to show you an example on how important that 1.45% is using the money I would deposit on a monthly basis to afford my trip to FinCon.
While a $10 difference isn't as significant, it could mean a big difference if you saved your money for a larger expense. Like a down-payment on a car or home 2 - 5 years or more into the future. But hey, $10 is $10.
5. Automate your savings
Now that you know how much you need to place aside, you have your high-interest savings account, be sure to automatically deposit the cash on a monthly or bi-weekly basis, or whenever you do get paid. That way you can avoid spending the cash the day you get paid.
I get paid on a bi-weekly basis, so every two weeks I will deposit $128.50 to my savings account the day I get paid. Set up a system so the bank can automatically take that certain amount until you reached your goal.
6. Place any bonuses, raises, or side income into your savings
To make your journey of saving for your goal shorter and be attained faster, place all extra income into your savings. Indulge in a little of that extra income, but be sure to place a portion of that income to the side.
I make some side income from selling items on eBay and of course the ads I run on this site. I make sure that majority of my cash goes into investments or in this case, my trip to FinCon.
If you have time for it and genuinely enjoy it taking time out of your day, I suggest to download a few apps or utilize some websites that offer coupons, discounts, cheap flights, etc.
- Gas buddy
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