Saving money may seem complicated. After all, if it were easy would there be so many apps, software programs, and professionals dedicated to the task? It must be way over the layman’s head – right? Wrong! Honestly, anyone can learn to save money. It’s as easy as 1, 2, and 3-er, well, in this case 1, 2, 3, 4, and 5.
To master the art of saving money, you have to want it. Be the savings. Okay, it sounds cliche, but you have to get serious about your finances and be honest with yourself about your expenses, income, and spending habits. Don’t be afraid of what your honesty may reveal. Remember, everything can be fixed. Sure, some mistakes may take a bit more time and effort than others but with dedication nothing is too big to overcome. Ready to learn how to save money? Here we go.
- Record each major category of spending including credit cards, gas, electricity, mortgage, and insurance. An Excel spreadsheet or Google Doc is just fine for this task. If you’re afraid you might forget something, take a look at some budget templates or budget calculators as many have fields for a whole variety of monthly expenses. Take your time with this step. One of the key steps in learning how to save money is learning how much you are spending and what you are spending it on in order to improve your savings efforts.
- Pinpoint areas of overspending. Look at each expense individually and drill down deep. This means looking at each line item on your credit card and bank statements. Yes, it is a laborious task and not a particularly fun way to spend your Saturday morning but it’s the best way to determine where you’re overspending. As a reminder, be honest with yourself! Ask yourself if an expense is a necessity or a luxury. If you find yourself horrified by all the stuff that needs to be cut out, keep in mind that you just need to get rid of it for now. Once you improve your savings efforts you may be able to bring some of those can’t-live-without items back.
- Make a strategy to eliminate overspending and use it consistently. For example, you may decide that your expensive gym membership can be replaced by walking the track at the park or with free workout videos on YouTube. That $30 or so a month from your gym membership will add up fast – that’s a savings of $360 a year! Write down your strategy and keep track of the money you save by implementing it.
- Review your progress on a regular basis. After you establish your savings strategy and put it into practice, keep track of your progress. Set up regular checkups. I recommend reviewing your savings progress monthly when you pay your bills but, in the beginning, you may find it helpful to review your progress bi-monthly or even weekly. Review your record and see how much you’ve saved. In addition, look for areas in which you could improve. For example, if you slipped and went out for lunch a few too many times with coworkers focus on improving in that area during the upcoming month.
- Reward yourself for your successes. Give yourself a little pat on the back to acknowledge your positive progress. For example, if you have been consistently meeting your savings goals, reward yourself with a little something that will keep you motivated like a grande drink at Starbucks or a manicure. In order to stay motivated try planning out your reward in advance. Each time you review your progress, set a new goal or stepping stone (ex. getting 15% of the way to your total goal) and tell yourself what you’ll get if you’re successful. Thinking about that new sweater or book may help you stay on track throughout the month.
Saving money may seem complicated but it really isn’t. In fact, saving money is a lot like losing weight. Sure, there’s a little pain to get the gain but its all worth it in the end. It can be done without expensive trainers (financial professionals) and equipment (software). All you really need to successfully save money is determination.
If you need help learning how to save money, or have a money question you’d like answered, ask Kelli. As a former finance professional, she’s happy to offer her services FREE of charge to you in the hope you and your family will be better prepared for financial success. Just leave a comment and she’ll select the most popular questions to address on the blog.