Everyone has undoubtedly tried to save money one way or another. Be it the extra cash they set aside, placed on a piggy bank, or are actually opening up a savings account for a travel fund.
Since we were children, we were taught to save money so we can have something to pull when the rainy days come. But as much as we try doing so religiously, there will always be instances when you caught yourself emptyhanded once again, due to poor and inefficient handling of savings or the lack of mindset and discipline.
So how can we actually save money effectively? These five tips shall help you go through the process of simple yet highly-effective ways of saving money.
Know your money goals
Everything starts with a goal. Would you like to buy a car two years from now? Are you eyeing for a new business so you can ditch your full-time work? Are you saving up so you can travel to Asia for a year? Determine where your savings will go. Note that you do not have to save money one goal at a time. You may juggle money goals as long as you can divide them according to your priority. Your list may vary from short-term—such as taking up online classes to long-term goals like putting up a business.
Write down the cash-ins and outs
Write down everything. Start with writing your monthly income, all income streams included. Do not just write your regular pay from your fixed-job. You may have a nice sideline baking pastry or doing freelance graphic works online. Include this in your notepad and note it down under your extra income. Next, jot down all your expenses—from bills like electricity, water, internet connection, and insurances to grocery, transportation, and gas, and clothing allowances. Write every bit of your expenses and see how much you spend money on them.
Determine how much you need to save
After writing down all your income and expenses, it is now the time to determine how much you want to save. Determine your money goals and divide it per month. This way, you can assess how long you can achieve your goal instead of just setting aside what you can save per month, depending on what is left from your income.
Divide expenses in categories
Expenses should be divided into four categories—the cost of living (house rent, food, and utilities); social costs (tuition, transportation, insurance, special and ceremonial occasions); entertainment (clothes, travel, and dining out); and lastly, the amount of money you want to save. Keep in mind that you also have other bills to pay, such as credit card payments and other personal loans.
Deduct the amount you want to save from your monthly income. The remaining should be divided into other categories.
Put up accounts for each category
Open four accounts specially designated for each category. Place the amount you intend to spend for each category to their accounts and use them every time you have to. While each month varies in expenses in categories such as entertainment and social expenses, you can stay flexible with it by reviewing them at the start of every month.
This trick helps you spend only the amount you designated for each category without having to touch any of your savings. This can also help you to reduce expenses and adjust to whatever is left from your accounts and track them without getting confused.
Start now
Lastly, you need to actually do it. You do not just make plans to lose weight and think of it. You have to get up and do baby steps to be able to attain that goal. Change your mindset, and do not let procrastination and doubts overcome you. Start now!
Materials Based on LifeHack
Photo Credits:
Money – Savings/Flickr
Damir Spanic/Upsplash
Mike Lawrence/flickr