“Never spend your money before you have earned it.” So said the principal author of the Declaration of Independence and third president of the United States, Thomas Jefferson.
Seems like a good rule to live by, but many find that there is often too much month left at the end of the money. Putting away just a little bit each month always sounds like a good idea, but the reality is that it can be challenging to save even just a little. What can you do to save money? Here are a few suggestions:
Keep Track of Your Expenses
To start, you need to know how much money you are spending. Expenses include not just major things such as rent/mortgage, food, utilities, insurance, and transportation, but you should record every cup of coffee, candy bar, every small impulse buy. Once you have this information, organize your expenses into categories.
Make a Budget
Okay, now that you know your expenses, it’s time to make a budget. Compare your expenses to your income. Are you overspending? How much wiggle room do you have? You simply can’t continue to spend more than you make, if that’s the case. When you actually compare your expenditures to your income, you may be surprised at how much you’re stretching your paycheck to the limit. See where you can cut expenses to create a little “profit margin” each month. Set a goal of saving a certain amount – maybe 10 or 15 percent of your income – on a monthly basis.
Know What You’re Saving For
It helps to have a concrete goal. Maybe it’s a down payment for a house, a car, new clothes, a nice vacation, or a new smartphone. Put a note on your fridge to remind you of your goal. Tell your friends about it. Calculate how much you need, and set a definite time frame in which to save the money.
Don’t Keep Your Savings Under the Mattress
Instead, find a bank with a decent rate of interest for a savings account; money market accounts often yield higher interest. Or take out a CD (Certificate of Deposit), which locks your money up for a certain period of time, but often pays a higher interest rate.
If you are saving for the long term, consider opening an IRA or investing in stocks or mutual funds. If these are unfamiliar waters to you, be sure to consult an experienced financial advisor.
Make it Automatic
Having your paycheck deposited directly into your bank account can reduce the temptation to spend when you see all that cash in your hand. You can split the deposit between checking and savings, or set up automatic transfers from one account to the other.
Watch it Grow
If you’ve ever planted a garden, you know that it’s exciting when you see your plants sprouting and growing. It’s the same with your savings. Check it regularly, and when you see how much you’re accumulating, you’ll be even more motivated and determined to keep saving!