Warren Buffett, the world-renowned billionaire and financial expert, advises:
“Don’t save what is left after spending; spend what is left after saving.”
Saving money is about more than dropping your spare change into a jar on your coffee table (though that's a good start). It's about having a plan to manage your money responsibly - a plan that you can reasonably maintain successfully both now and in the future.
Prioritize Getting Out of Credit Card Debt
For many people, credit card debt is the main factor that makes it difficult to set aside money each month into a savings account. When you carry a balance on your credit cards, your interest rates are much higher than the interest you can earn on money in a typical savings account. That means that your credit card interest debt is costing you more than you can earn in savings interest.
So, it makes good financial sense to focus on paying off your credit card debt as soon as possible. If you owe a substantial amount in credit card debt and feel that you are unable to pay it off in a reasonable amount of time, it may be time to consider getting professional debt help.
Call a ClearOne Certified Debt Specialist at 888-340-4697 to discuss your unique situation, explore your options, and get a personalized debt plan today.
Once you see the solution to your debt situation, it's time to turn your attention to reducing your expenses and building your savings following these steps:
- Record your expenses and cut your spending.
- Create a workable budget.
- Set savings goals.
- Automate your savings and pick the right tools to meet your goals.
- Get your savings priorities right.
Recording Your Expenses and Cutting Spending
You need to know how much you spend and where your money goes. Track every cent you spend and organize your spending into categories, such as utilities, groceries, etc. You can use bank statements and credit card statements to double-check your numbers.
Once you know how much you spend on everything, you can figure out ways to cut spending. For instance, consider the following proven ways to save on common expenses:
- Make a detailed menu for each week and base your shopping list on that menu. When you shop, stick closely to the shopping list, avoiding impulse buys.
- Cook at home, and think creatively about meal prep that will help you stretch your meal dollars. For instance, consider adding an extra serving of protein to your main course in the evening so that you can make a sandwich with leftovers for the next day's lunch.
- Invest in a freezer, and buy produce, dairy, and meat in bulk when it is on sale to save throughout the year.
- Buy canned and dry goods on sale, in bulk, or with coupons from manufacturers, grocery chains, newspapers, or magazines.
- Use grocery chain loyalty and discount cards.
Monthly Recurring Expenses:
- Heating/Cooling: Program your thermostat to minimize heating and cooling expenses.
- Water: Use low-flow plumbing fittings to minimize water usage.
- Rent/mortgage: Consider getting a roommate or moving to a smaller home to lower housing bill.
- Gym membership: Purchase gently used gym equipment for at-home use from yard sales, Craig's list, or thrift shops.
- Consider dropping cable or satellite TV service in favor of streaming services.
- Consider renting games rather than purchasing them.
- Visit free tourist attractions or low-cost options like national parks.
- Choose camping or hiking over traveling to resorts.
- Check out local festivals and shows, which are often free or inexpensive to the public.
- For major purchases, never buy on the spot. Do your research, look for sales, and sleep on it before you make a purchase.
- For clothing, check clearance racks, buy out of season, and consider shopping at consignment or thrift stores. You may be surprised at what you can find if you take the time to look carefully.
- For small furniture items, knickknacks, and baby clothes, check out local yard sales. Though you might have to wade through some undesirable items, there may be hidden treasures awaiting discovery.
- Pay cash whenever possible. When you are feeling sad, anxious, or worried, leave your credit cards at home if you have to go shopping. This will help you avoid "retail therapy."
Creating a Workable Budget
Draw up your spending plan based on your income and stick to it. Do not leave out anything, and be sure to factor in occasional expenses. With proper budgeting, you can save around 20 percent of your income.
To keep yourself motivated to stick to your budget, set yourself a savings goal. Cold, hard cash is nice, but it may be more motivating to think about your savings in terms of other, more enjoyable things, such as:
- A vacation
- An emergency fund
- Home down payment
Make sure that your goals are achievable. Seeing yourself getting closer and closer to your goals over time will help you stay motivated to continue on your path and reach your ultimate goal of financial independence.
Choosing the Right Tools for Saving
For short-term savings, some people find it helpful to set their checking account to automatically transfer a certain amount to their savings account at regular intervals so that they are not tempted to skip a savings payment.
You may also enjoy using a savings app that automates the process of saving for you. Popular savings apps include Qapital and Digit. Regardless of the tool, the one that will best help you stick with your savings goals is the right tool for you.
If you are currently struggling with credit card debt, you can start saving by addressing that debt. Get a free savings estimate and see how much you can save today!