It is no secret that it is a challenge to save money in order to reach a goal. Due to multiple responsibilities, saving is impossible. The biggest area people seem to fail in is budgeting. A budget is a spending plan based on income and expenses.
In the spirit of knowing how much money to spend on what, budgeting can be tough when there are things you want and things you need. Do I want to satisfy my craving for wingstop or should I buy some paint to fix the chips on the wall in my room?
Some people end up putting all their money towards one thing, forgetting about all the others. This is how people tend to fall behind on important things such as bills. However, when you set financial limits or goals for yourself, you can put your savings where they are needed.
It is hard to keep track of where your money goes, and how much of it goes to a specific cause especially if there are multiple ones.
According to Bank of America & Capital One’s official websites, here’s how to properly save your money, while still being able to pay off debt or afford your wants and needs:
- Have a clear savings goal: Whether you are saving for an emergency fund, working to reach a savings goal, or trying to pay off debt, you need to be sure on what exactly your goal is and if you are ready to take those steps to achieve it. While you are saving, you should also think about debt–specifically how much more it would cost you with charges like interest rates, and penalties.
- Take a look at what you owe: If it is guaranteed that you are in debt, it is important to know the exact amount that you owe. You especially want to make sure you can handle recurring bills before taking on extra expenses. Utility and rent are recurring bills that count as various forms of debt. If you miss payments, you can be charged with fees or banking charges. Missing payments also tend to have a negative affect on your credit scores.
- Record your expenses: The first step to save money is to keep track of how much you spend. “That means every coffee, household item and cash tip as well as regular monthly bills”. Whether you use pencil & paper, or a spending tracker app, organize the numbers of your spendings by category.
- Make A budget: Budgeting can seem very difficult but it’s not. All you have to do is add up your monthly income, add up your monthly expenses, and subtract your expenses from your income. When adding up your monthly income, be sure to include your salary from your job as well as bonuses, tax refunds, or income from side work. Monthly expenses include housing, food, and transportation. For expenses that are not always the same, you can use an average from previous months. When subtracting from your income, anything that is left over is what you have to work with when you’re building down debt and building up savings.
- Include savings in your budget: You can create a budget after you make note of what you spend in a month. Your income and expenses should be lined up with one another, “so that you can plan your spending and limit overspending”. Also include expenses that are spent often, although not regularly. Be sure to add a savings category and aim to save the amount that you feel most comfortable saving.
- Find ways to cut spending: If you are not saving as much money as you desire, it may be best if you cut back on some of your expenses. Look for different places that supply things that are not as important, such as junk food, makeup or clothes, for a much lower price.
Set dates: Whether it is in 2 months or 5 years, set a goal of how much money you want to save for specific causes both long term and short term. Then come to a conclusion of how much money you need and how long it will take for you to save up that exact amount.
- Determine your financial priorities: Because Due toof your income and expenses, the goals that you set for yourself are more likely than not to have a large impact on how you distribute your savings. “For example, if you know you are going to need to replace your car in the near future, you could start putting away money for one now.” Whether it is a desired want or a desperate need, always be sure to think long term. This way, you will have an idea on how to properly acollate your savings.
- Pick the right tools: There are plenty of saving and investment accounts to choose from that can help with both short and long term goals, which you can pick multiple of. Be sure that when you are choosing these accounts you are aware of minor setbacks. This includes balance minimus, fees, interest rates, risk and how soon you will need the money so you can choose the mix that will help you best save for your goal.
- Make saving automatic: A lot of banks offer automated transfers between your checking and saving accounts. “You can choose when, how much and where to transfer money or even split your direct deposit so that a portion of every paycheck goes directly into your savings account”. The best part about it is that you are less likely to spend the money this way. Saving tools such as credit card rewards and spare change programs round up transactions to the nearest dollar and transfer the difference into a savings or investment account.
Remember to examine your budget, readjust it and check your progress every month. You can identify and fix financial problems quickly, all while sticking to your personal savings plan. When learning how to properly save and budget your money, you reach your goals faster. When you properly budget and set goals for yourself you will have those new sneakers or new headphones in no time.
