Saving money can be a difficult and time consuming goal to achieve especially when you are trying to save larger sums of money. If you live in a big city then the harder it is. If you find it particularly difficult to put money aside then here are a few steps to take before and whilst saving money.
It is worth the time and effort to set yourself straight financially because knowing your money goes a long way. Having a debt and not paying it off straight away means you need to get to know your money and stop treating credit cards as if it was your money.
Once you realize that sound budgeting and financial planning is beneficial, you can teach yourself to value your money and you will know exactly where you stand with your finances. Then you can start saving; here is how you can do that:
Get clear with your finances
Firstly and most importantly write down or create an excel spreadsheet on your monthly outgoings. It is useful to create a separate tab for each month. You can create separate columns for ‘’budgeted’’, ‘’actual’’ and ‘’left over’’ so you can keep an eye on what you have left to spend in certain areas. Add formulas to it so it automatically changes what you have left or when you have exceeded your budgeted amount. Then, write everything you spend on there!
The first few months can be an estimate on a few things like how much you spend on going out or much you spend on groceries and shopping however you should have a clearer idea of your outgoings such as rent, bills, travel and any credit card payments or debts that you have. You will get it right after one or two months of writing everything down. This will give you and idea of where your money is going, where you could cut back and what your fixed spending is – rent, bills, credit card debt.
If you owe it, pay it
There is no point to put money aside when you have a credit card bill that is sitting there getting fat on interest. If you are making minimum payments each month then change it. After knowing what you have to spend once you’ve done your spreadsheet, you can see where you need to cut back so that you can pay off bigger sums of money each month. Paying the minimum each month will not even cover your interest, you can do better.
Depending on your debt, it can take anything from few months to five months or more. If you feel like this isn’t taking you anywhere, you’re wrong. Paying off your debts and realizing that it’s not your money and that you need to give it back sooner or later makes you value your money more and makes you realize that credit cards aren’t for shopping, but ONLY for using short term on things that you can actually afford and paying back the next month. When you understand this, you will no longer be tempted to go shopping for things you cannot afford.
Have the right mindset
After setting straight what you owe, you can start planning what you’re going to save for the year. Checking the ‘’annual total’’ every now and again helps to keep you motivated and you can check out your progress as the months go by. For instance, use separate tabs for each month where all your outgoing expenses are written down – rent, bills, groceries, shopping, going out, Christmas presents, birthday gifts and the list goes on. The good thing about setting a plan for the whole year is that you can plan ahead and write down when you need to spend more money on presents or holiday, insurance or any other bigger outgoings. So for example if you know you will spend £200 on Christmas presents, you can set £100 of it aside in October or November to make December easier to handle.
This is all just a plan on a spreadsheet, but it does miracles on setting your mind on the right thing – your money. Now when you have everything clear and written down, you can see how much you can afford to put aside. Write down SAVING as an outgoing onto each months tab. You can alter the spreadsheet so that instead of spending £300 each month on shopping you could only spend £100 because the £200 could go into your savings tab. Go through the whole year and make a special effort during the months you are trying to pay off your debt as these sums will probably be higher than you are used to paying out.
Just remember that being tight for few months will pay off your debt, quickly! Only leave the money that you need for food, bills, rent, travel and other outgoings that will be there regardless (smoking if you are a smoker etc) Now you have a plan. It might sound longwinded and useless because after all, it is just a spreadsheet and reality might be different.Yes this is true but it gives you the right set of mind – keeping an eye on your money.
So when you write down what you have spent every day or every week, you will see how much you are spending and perhaps won’t buy that coffee next time because you know it will be on that spreadsheet! Buying that coffee is another £2 you could save or pay towards you debt. The only way to do this right and get the right statistics is to be honest with yourself. And statistics is exactly what you need to realise what you need to assess and amend in your finances to get some healthy savings in the long run; look, assess, act.
Set a saving goal
Now that you know what you spend, where you spend it and what you don’t need to spend money on, you can set you self a goal. If you need to save a bigger lump of money like £4000 by the end of the year, calculate how much you would need to put aside each month to reach your goal. Add this to your outgoings for each month and stick to it.
When you get paid, consider that £200 gone and dead and put it away on to a savings account. If it works better, open a savings account where you can’t touch your money for a certain amount of time. Once you have it all written down and calculated, your financial plan is ready and all you need to do is follow it. It’s easy, and if it doesn’t quite work the first few months, don’t worry, you’re still assessing. The main idea here is to teach yourself the value of your money and what you can afford.
Where to cut your spending to save more.
There is no point to live on instant noodles the whole year and not have any fun. We all need to let some steam out so cutting back your fun budget completely can be too stressful and lead to giving up or getting depressed. In your ”budgeted” tab don’t forget to budget for some fun time. Think about where you spend your money and if perhaps you could get the same thing cheaper. Where do you buy your groceries? For example,consider doing a price check between Tesco and Aldi.
It’s also better to do a weekly shop rather than shopping every day. Plan ahead and consider taking packed lunch to work instead if spending £5 or more on lunch each day. You don’t have to cook for lunch every time. You could simply buy some sandwich wraps and prepare them the night before from left over chicken or whatever veg or meat you have in the fridge. Again, by planning ahead, you would buy this from Aldi when you do your weekly shopping; it will save you money.
Cut back your shopping in general. Do you really need those shoes or that jacket? Think about it. Today’s society is being tricked into buying all the latest gadgets and trends. It’s normal these days to only wear you new clothes for a season only and then ditch them and buy something new. Don’t give into it; every time you want to buy something, think if it’s really worth it and if you do really need it. Can you justify spending £100 on a jacket when you know that you have a debt to pay or money to save? On top of that, can you justify buying a new jacket if you know you already have five jackets in your wardrobe. A little treat every now and again is a must of course. However, this is only if you know you’ve done really well, if you know that you deserve a treat and that it won’t push you out of balance with your saving and/or debt paying.
It’s all in your head
The reason why some people including me, find it so difficult to get rid of debt and start saving money is the incorect attitude towards money. And that often happens because you don’t keep an eye on what you earn vs. what you spend. Often, people who have debts tend to think that what they want to spend is what they can afford to spend. This is where credit cards get you into trouble. If you want to spend more, you spend it on your credit card and not being able to afford to pay back the full amount every month, the minimum payments continue and the desire to spend more money continues with it.
Hopefully this article helped to put things into perspective and following the spreadsheet rules does go a long way. Methods like this help people get rid of debt and allow them to realize what is affordable and what is not. Credit cards can still be used, but it is wise to pay back revolving credit in full every time it is used to remain debt free, or as close to debt free as possible. Learning how to manage your money can teach you valuable financial lessons and help you save money.