Sometimes the hardest thing about saving money is getting started.
Now, I’m a minimalist. So what I’m going to share here might or (very likely) might not be applicable/acceptable/workable to most ordinary people out there. Nonetheless, I’ll still do my best to share some tips on how you can better manage your finances.
Here are six simple ways on how you can get started:
Record Your Expenses
I’m a very calculative and detailed person. Those who know me well say I have the character of an accountant. I keep records of every single transaction and spending in the most detailed manner. Bills, receipts, bank statements, etc.
The most basic way to getting started is to keep track of all your expenses. That includes every coffee, food and household item. Compare your expenses with you credit card and bank statements to make sure it tallies all the time.
Settle Your Debts
Avoid debts. Seriously, debt is a real wealth killer.
I can’t speak enough of this. If there’s one thing that can stand in your way saving money, it’s debts.
Whatever you do, settle (all) your debts first. Clear your bills every month. Never owe. Never pay minimum payment. The amount will pile up – DEFINITELY.
And never ever borrow. Whether it’s from banks, relatives or friends, whatever. I would rather have nothing to eat and not buy any groceries than owe people money. But that’s just me.
Getting into debt is the worse thing that can ever happen to a person.
Creating a Budget
The first step in creating a budget is to identify the amount of money you have coming in.
For those employed, it’s easier as you have a fixed amount of income every month.
For those having your own business or freelancing, things will be harder. And when I say harder, I really mean it. Your income is not fixed. You could be making millions this month but you could have zero income for the next few months.
But whatever path you choose, always create a realistic budget.
I’m a minimalist so my budget mainly consists of bills (the largest portion) and essential items like groceries. I make sure I don’t spend more than that. No junk food, snacks, gadgets, travelling and hangout sessions with friends.
So it all depends on your lifestyle.
Find Ways to Cut Your Spending
If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. “No” seems to be the hardest word to say but if you want to have enough to survive, then you better learn to say that word and act on it firmly.
Many a time, temptation takes control. It’s so easy to just take out our credit cards and wallet without thinking about the consequences that follow. Been there, done that. When I was younger, I would spend without thinking. I bought things that I don’t even use but just for the sake of owning that product. I wasn’t economically sound at all. And I regretted my actions till today. I only started to really save when I was in my late 30s. And being a minimalist (at 40) helped a lot – definitely.
Here are some ways you can trim your expenses:
> Cancel subscriptions and memberships you don’t use – especially if they renew automatically.
> Prepare your own meals. Commit to eating out only twice or thrice a month. Go for places that fall into the “cheap eats” category.
> Give yourself a “cooling off period”. When tempted by a non-essential purchase, wait a few days. You’ll be surprised a few days later, the temptation is gone.
> If you’re a parent or head of family, learn to say NO when the kids ask you for something non-essential. Sometimes you just got to be firm and tell them that money doesn’t fall from the sky. If they want something, they’ve got to work for it. Unless you have a bank account of Warren Buffett, saying NO will come a long way when it comes to saving up for the future or a rainy day.
Decide on Your Priorities
One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for: Getting married, expanding a business, setting aside money for kids’ education or saving for retirement. Then figure out how much money you’ll need and how long it might take you to save it.
After your expenses and income, your goals/priorities are likely to have the biggest impact on how you allocate your savings.
Create an Emergency Fund
I think this needs no introduction. It’s as clear as the title.
Whether you’re setting aside $500 or $10 every month, an emergency fund will always come in handy when the need arises.
Without emergency savings in place, an unexpected car repair, job loss or trip to the hospital could force you into debt and derail your goals.