If you’re a financial blog reader, you are most definitely being bombarded by “good advice” almost every day and I have to admit myself that sometimes the advice is complex and hard to understand. Any time someone swears that their ideas are foolproof and guaranteed to bring you financial peace of mind and success, you should be just a bit skeptical when it comes to your money and re-read the words a few dozen times before you jump right in to changing everything about your money and life. That’s one “blog tip” I will share and stand by, for sure. But sometimes, the advice you read about can be pretty simple and really basic and practical. Yet, despite that fact, many people read about those best ways to save money, understand them, and never do them! Why is that?
Is Anyone Really an Expert When It Comes to Money?
When it comes to money, there are lots of people claiming to be experts. No doubt some actually are just that. Either they have learned about financial success through their own experiences or they have studied about it and learned to apply what they have learned to real life. Some of these people are household names like Dave Ramsey or even Suze Orman. But what about all the other hundreds of people (like me) who are willing to share some saving tips that we think are right on? Should you believe and trust our advice?
Well, in most situations that’s where you have to use some real judgement. It’s never a good thing to just read or hear something that is suggested or recommended or even insisted that you do about anything, unless you really think about it first. If you are having real problems with your finances, of course you would want to make changes, but what specifically and when?
Often, the thing that’s best for us is the thing we really don’t want to do. Saving more and spending less is really boring; why do that when you can have fun with your money now? If you aren’t in the mood or “money mindset” to save, it doesn’t matter how many times someone shouts out loud ways to do it. It will fall on deaf ears about 100% of the time.
What Happens When We Fail to Try to Save?
First of all, most of you out there are beyond asking this question because you already know the answer. It’s pretty obvious. If you make no attempt to save money, you will probably wind up in debt. Sound familiar? Look in the mirror and you will probably see someone who is struggling now with debt and wondering why and how it happened.
It happens because you don’t put any importance on saving and you enjoy spending way too much. At some point in every life “a little rain must fall” and you may be in a monsoon of debt right now because of that continuous drip, drip, drip. If so, now is the time to listen up.
There are some very basic pieces of money advice that experts give all the time and yet you and so many others simply ignore them. No one seems to want to follow them. So, let’s make a deal today. How about we start listening and actually try to do what the practical experts are saying? I’m not talking Keynesian economic theory* here by any means. I am speaking of the obvious. Why? Because they all work and the sooner we start, the sooner we’ll reach our financial goals.
*Keynesian economic theory of total spending in the economy and its effects on output and inflation was developed by John Maynard Keynes in the 1980’s.
Best Ways to Save Money
1. Run your personal finances like a business does
You should treat your finances like a business does, because just like in a business, in the business of life your bottom line matters. Many of the same principles business owners use can be applied to your personal life like making priorities, assessing your cash flow, and restraining yourself because you just can’t do that spending right now. Everything that keeps a business running will keep your personal finances in order when you don’t lose sight of the big picture, like saving for retirement or getting out of debt.
When it comes to actually saving and making more money, there isn’t a one-size-fits-all strategy. Every business has its own unique goals and needs, and you will too, but you need to actually take a hard look and plan accordingly, not just think that no matter what everything will be fine.
2. “Money Saving Mindset” – saving is a real part of your life
You don’t have to make drastic lifestyle changes to build up your savings. It’s like a muscle that builds slowly by making small adjustments over time. Successful savers usually fail a few times (or more) before they figure out what works best for them. It’s easy to get discouraged and give up, but just like exercising and eating well, saving money takes a while to get right. After some time, you won’t even notice the spending and saving differences, except of course in your bank account balances.
3. What about coupons and discounts?
Even if you are not a bargain hunter, no one with a brain ever turns down a discount on something they actually need and want! That’s why there are so many coupon clippers and thrifty shoppers. But what exactly do you do with all the money you save? If you’re like most consumers, you just spend it on something else. But, the point of getting a discount is to save money, right? Here’s what you can do and that is the next time you get a discount or score a sweet deal, deposit it away. Talk about building up you nest egg, this really works!
4. Fool yourself
Many economists say mental accounting (i.e. treating different piles of money with different intentions) helps trick your brain into better budgeting and saving. This strategy might sound a little complicated, but it’s really a take on the classic envelope system, where you allocate your paycheck to a weekly or monthly budget and put the cash into different envelopes. Make one for each budget category. Once the envelopes are empty, your budget is maxed out. You can’t spend what you don’t have or guess what…debt becomes your worst nightmare!
5. Just live on less
No, you don’t have to survive on a diet of ramen and frozen burritos in order to get ahead, but you can take a lesson from others like from struggling students everywhere and learn to live with less. If you are just starting out in the workforce after college, try living on say 75% or even 50% of your paycheck. Since you’re probably already used to living off very little, that should be enough to get by. Meanwhile, you’ll pad a robust savings account with that money each month.
For those who aren’t fresh out of college and have large expenses like a mortgage or child care, try saving a penny of each dollar you make, just a simple 1%. Then step it up another penny every six months. In five years, you’ll be saving 10% of every dollar you make; in ten years, you’ll be saving 20%. Picture how much and how far that money will grow over time.
6. Automation is magical!
This is a piece of money-saving advice that is echoed by nearly every financial expert. Paying yourself first is the first step, which means setting up an automatic transfer from your paycheck into a savings or investment vehicle. You can set up one large transfer to go through monthly, weekly or whenever works best for your finances as long as it’s automatic. You’ll be saving without even realizing it.
If you aren’t sure how much to start, try automatically transferring 5% of each paycheck and see how that feels. Increase it as it begins to feel more comfortable and soon you will see that you can live just fine without that amount burning a hole in your pocket!
If you want to control spending and actually eliminate debt and save money, then you need a budget. There’s no way around that.
A budget is all about being intentional. By that I mean every dollar you have has a place designated for it and one of those places has to labeled savings!
The budget will help you see where your money is going and find out how much you can actually save each month. It is so true that it’s not all about how much you make, it’s about how much you spend!
Tracking your income and spending is the only way to have control and that’s when saving becomes your way of life!
Do you save money? What do you do with it when you do? Do you have a real budget and does it include a savings plan? How do you track your money and what is preventing you from saving right now? Does 1% sound like a good way to start?