Do a little research on the Internet, and you will find link after link leading you to some site that offers a way to save money. However, cutting back on expenses is only the first step in saving. You then have to put your savings away for that proverbial rainy day.

Develop a Savings Strategy

Being able to have what you want in life without getting into extreme financial debt can only come from careful financial planning. It doesn’t require a large income, just the willingness to take some time to plan how you can save.

There are five steps to get started:

  • Monitor your monthly spending
  • Eliminate excess monthly costs
  • Review your monthly income
  • Determine how much you can save
  • Establish where to commit your savings

Monitor Your Monthly Spending

If you expect to save, you need to live within your budget. Racking up unnecessary debt is why most people never even open a savings account. Monitoring your monthly spending can help you:

  • Stay out of debt
  • Find unknown savings
  • Create a savings plan
  • Avoid impulse purchases

The best way to monitor your monthly spending is to track your monthly spending habits. While Intuit’s Quicken and Microsoft Money are great tools to use, feel free to use good old paper and pencil.  

Eliminate Excess Monthly Expenditures

Before you plop your money down on the counter, ask yourself if you really need that Iced Cinnamon Dolce Latte or that new pair of shoes by Manolo Blahnik?

Reducing costs, especially those that are discretionary, is the best place to start saving. In fact, if you have a routine habit, such as a morning cup of coffee from your favorite café, here’s a trick to start saving. Take the money you spend each day and put it into a savings account. Even $4 a day will net you $20 a week and over $1000 a year in savings.

Think of all the items you can eliminate out of your daily routine that might help you to increase your savings.

Review Your Monthly Income

Reducing costs is not the only option when it comes to increasing your available cash for savings.

Even though the typical worker has limited control over his income, if you have any opportunity to increase your inflow, such as working overtime or picking up a side job, consider taking advantage of the additional money.

Determine How Much You Can Save 

To determine how much you can save each month, subtract your monthly expenditures from your monthly income. The remaining amount is your discretionary income. You can either save or spend it.

Even if you have to start slow – like the coffee example above – it is better to start saving now than to continue putting it off. Some of the best tips on how to save include:

  • Choose a reasonable amount to save or you won’t be able to stick to your plan
  • Set up an automatic savings account – through your employer or bank – so you don’t feel the pinch
  • Join your employer’s 401k plan and take advantage of any matching funds

Establish Where to Commit Your Savings

While many experts advise you to decide what you want to save for, determine how much it will cost, and then execute a strategy to reach your goal, we suggest you create two savings accounts – one to use for emergencies and the other to use for big purchases and luxuries.

It might take you a little longer to save enough for your new home; however, you’ll be thankful in the long run if you suddenly find yourself unemployed. It’s merely a matter of determining how much you want to put into each account.

Opinions vary on how much emergency money you should have on hand should you lose your income. However, most agree the minimum is at least six months.

Let’s begin by assuming that your current net monthly income is $3000. If you spend some of this on discretionary items and save a portion, perhaps you only need 80% to meet your monthly obligations. In that case, a six-month reserve would be $3000 x .80 x 6 or $14,400 that you would need in your emergency savings fund.

The whole idea is that with a little finesse and lots of discipline, you can create a nest egg for your future.


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