More Tips on Saving Money and Setting a Budget
We have all had to tighten our strings once in a while as we felt the money flowing out more than it flowed in. Each individual’s strategy of dealing with cash troubles is different; some set up withdrawing limits to curb heir impulsive spending, others start writing down their expenses and yet others keep spending in the hopes that it gets better (spoiler alert, it does not). Here are some tips that can help all kinds of requirements in terms of budgeting.
Establish a Budget
The list starts the hard way – to set up a budget that calculates your expenses and sources of income so as to set a mid-way of fund allocation that can ensure you have some set aside for the occasional splurge. The easiest way to realize your spending habits is to make sure that you collect the receipts of all your purchases and pin it up on a board. You can always make a note of the purchase as well but chances are you might forget in the hustle and bustle and then forget the transaction happened. Once you get the receipts, try to separate them into categories like groceries, eating out, personal care or books so that you are able to draw a clear path as to where you spend the most. Online banking apps make this a much simpler exercise – casually viewing the expenditure in these categories can be the shocking reminder you need to continue with this list.
Save for both the short-term and long-term
Don’t just think about the shoes you want by next month when you save money – also think about the mutual funds or bonds you wanted to invest in that gives long-term yields and secure your future. When you put in a purpose, it is easier to rein your habits. It could be a shoe now; it can be college fees or even travel later. Here, the idea for automatic savings sounds like a good idea. Since the money goes directly from your account, there is no chance of you diverting it elsewhere. Also, it helps tremendously that you have a process set in place at regular intervals which makes following it much easier. You can always ask your employer to divert some part of your salary into a retirement or savings account. If you don’t have an employer, set a process for yourself and make sure you follow it.
You are never too early to save up for retirement funds – no one’s current wealth is the single source of their future security; you need to utilize the helpful tools of simple and compound interest.
This stage is very important – as unpredictable life gets, there is no need to convince anyone on the necessity of setting up such a fund. Ideally, it should be four to five times of your monthly income – if this seems like a huge amount at first, start with a small amount and build up. Don’t take too long to set the fund up and don’t touch this fund unless it is an actual emergency.
Divert and save
Whenever you get tax refunds or bonuses at work, any lottery winnings or even inheritance payouts do not consider this as free money and splurge it. Save a significant portion into your savings account or retirement plan, maybe even your emergency fund. You know what is better than free money? Getting that money back after 10 years with a good interest rate that might even go above and beyond the inflation rate to get you a profit!
Put aside the coins
This might seem a simple tip, but putting aside the spare change can actually build a good amount of a period. Do this daily for a year and you could be halfway through to your emergency fund.
Use the 24-hour rule
We all know the negative side-effects of impulsive spending and immediate gratification. Online shopping has only made it worse as you don’t have to even step out and wait to find something you like. Try to manage a deal with your unruly side – give yourself 24 hours before you purchase anything that you’re convinced is non-essential. Leaving yourself time to cool manages to wipe away most of the heat and adrenaline rush and this allows your brain to make more sensible decisions. Another tactic would be putting proportional amounts into your savings when you do splurge on something. If you bought a dress that can only be worn once for that one party, put in the same amount into the piggy bank – often, the buildup of such actions can discourage you from spending again.
Use hour money
This is much like counting the calories of the food item before you consume it, but here’s how this is useful. Before you buy an item, divide its price by the hourly wage you earn; use this to find out the number of hours you would have to work to pay this off. This mental image often provides a disturbing mental image and a big incentive to not spend impulsively.
Set reminders everywhere. If you have a daily spending limit, keep to it with something as simple as putting alarms. Get the reminders on your credit cards and even debit cards. If you have managed to stick to your goal – or (gasp) below this goal – give yourself some appreciation NOT by spending over the top again but through some colorful sticky notes and maybe a small cupcake, because you deserve it.
Cards and envelopes
Always remember to pay off in full what is accumulated on the card. Believe us, once you start to ignore, the ‘ignorance is bliss’ adage kicks in real quick. Better yet, set a certain amount aside in an envelope that is your allowance for miscellaneous purchases and train yourself to believe that once the money in the envelope is gone, it is gone.