Saving money when you’re ‘broke’ is never easy. In fact, most people will claim its impossible. After, if you’re ‘broke’ you have no money to spend right?
Personally, I don’t believe that.
Everyone earns money. Period. Heck, even most children receive an allowance and cash during special occasions.
In my opinion, it’s a matter of dicipline, awareness and complete focus on achieving a goal.
For me, that goal is to be able to retire at the age of 45 with a steady and very comfortable passive cashflow in Malaysia which translates into NOT having to reduce my lifestyle until I kick the bucket. I also have subgoals to complement my main goal.
Many people probably lack defined goals thus having nothing to strive towards. Some will say "I want to retire young." or "I want to be rich." or even "I want to have a house with no debt on it."
Thats all fine. However, note that it is all relatively vague goals. Clear goals will outline the ‘what’, ‘when’, ‘how’ and ‘why’ just like a formatted piece of writing. There is no where unless property or travel is involved though.
As can be noted from my goal, my ‘what’ is to retire. My ‘when’ is the age of 45. My ‘how’ is having steady passive income. My ‘why’ is to NOT reduce my lifestyle until the day I keel over. I even added Malaysia as my ‘where’ because after considering migrating I decided I wanted to remain here.
This goal is clear cut and well defined giving me a more solid image of what to work towards. And in case your wondering, yes I have decided on an exact annual income amount but thats confidential.
Now, your wondering "That’s all great but what’s it got to do with saving when Im broke???"
Well, everyone needs a reason to do something and saving money definitely requires a reason because no matter what people say – it isn’t easy.
Money allows you to spend, travel, buy the latest and the best or just impress. So the temptations it offers is great. Which is why we need a more tempting and greater goal to steer us in the right direction.
Now on to saving!
First of all, I will state the proven effective method of saving. Budgeting.
Yes yes, you have heard it all before but this is the first and most important step. You MUST know where your money is going before you can control it.
Work on something that you know you can use. If it means writing everything for a month down with no order then do that first. And I mean EVERYTHING!
Everything parking payment, every soft drink, the stamp you bought at the post office, any bank charges, your loan payments, money you lent your friend, etc. EVERYTHING.
You might cringe reading that but it is vital. How many times approaching the end of the month have you asked ‘Where did all my money go???"
Exactly. So go find a little notepad, a pen and stuff it into your purse, bag or pocket everyday and write down what your spending your money on. After doing this for a month without changing any of your spending habits, sit down and look through it.
Surprised? In most cases, you will be. People tend to downplay or underestimate how much they spend on alot of things like movies, clothes, drinks, fuel, etc.
After looking through the list, categorise the items to make them easier to sort through such as ‘bills’, ‘entertainment’, ‘transport’, ‘takeout’, ‘groceries’, etc.
Now, we trim things a little. You aren’t as broke as you think. Sit down and think about stuff like subscriptions and un-needed purchases you make. Got cable AND netflix for example? How much do you use both? If you find yourself not using one or the other optimally, cancel one and put that money aside for savings. Got magazines you subscribe to but never read? Cancel it then. Borrow from your friends, or the library or even see if any nearby cafes or restaurants carry them each month and ask for a copy free at the end of the month.
If you find yourself eating out alot, try cutting that back by just once a week or even two and opt to eat at home. If your not a great cook, look online for simple recipes (THERE ARE PLENTY!) and experiment. This can easily save you alot of money as going out entails some sort of transportation cost (unless you walk), the jacked up price of food (duh), service charge, and tax. At home, it may seem tedious to have to clean up after yourself but it probably wont take you more than 5 to 10 minutes, maybe even less, if you keep the meal simple.
Another way to save money is to reduce going out if you are a constant partyer or movie goer. You would be shocked at how much going to a club or the movies can cost a month even if you only go once a week. But no drastic reduction. We don’t want to shock or deprive you. Maybe cut down going out once or twice a month. Ask a couple of friends over to chill and watch TV or arrange a game night! Play monopoly, scrabble, or risk. Make it a potluck and have everyone bring over snacks or drinks and have a blast! You will have fun and saved some money!
One more tip is simply to see what you are regularly purchasing but can do without and cut it out. If your a smoker, either quit or buy a smaller packet to save. If your a starbucks yuppie, try to cut back on it or go without it altogether. Love buying knick knacks and ‘cute’ stuff you will never glance at again. Just stop buying them. Seriously.
None of the tips above are drastic or overwhelming because they aren’t suppose to be. Most people who have never watched their spending won’t save if they are suddenly forced to be extremely restricted in their monetary outflow. Start easy. Later it becomes easier to cut back. The most difficult part of the whole process is probably to write down everything you spend on. But once you are on your way, you’ll find your not as broke as you were before!
Hopefully, this series of ‘Finanically Free’ will help and educate you on how to save, earn, invest and reach financial goals. I certainly hope it will help keep me on track of my own.
Toodles~! Good luck with the savings!