Many of us close each year saying that we wish we had saved a little more money. We vow that in the new year we will get our lives together and start putting funds to the side for that big vacation, unexpected expense, holiday season, or various other needs/wants. Ultimately, goal of saving money is financial freedom — the ability to make your own decisions when you want to make them, without having to rely on someone or something else. If you’re truly serious about saving, I’ve compiled a list of my top seven tips to help you get started on your journey to financial freedom.
- Set Goals – think about what’s important to you so you can prioritize spending and saving. A few savings goals are:
• Emergency Savings – larger fund for in case you lose your job, can’t work, or something comes up that requires a significant amount of money.
• Rainy day fund – cash to dip into for an unexpected expenses
• Paying off debt – due to high interest rates, carrying credit card debt can cost a lot of money over time.
Make all attempts to pay more than the minimum monthly payments. Inquire about transferring debt to a lower interest credit card. Once the credit card is paid off, do not close the account; keep the account at a zero balance. Closing the account could negatively affect your credit score. When you pay off a debt, keep making the payment – to your savings account.
• Buying a house and/or car – if this is a goal within the next five years it’s important to put this money away in a safe place, such as a savings account, where it’s not at risk.
• Retirement savings – the more time your money has to grow, the wealthier you’ll be in retirement. Start saving early!
- Reduce expenses and increase your income – monitor your monthly expenses. Eliminate unnecessary and wasteful spending. Start with the expenses you can easily reduce from going through one month of expense statements line by line. If you want to stop living paycheck to paycheck, you have to know where your money is going and you have to give every dollar a purpose. You can also reduce spending by cutting out monthly bills like cable.
If your car payment is more than 10 – 15% of your monthly income, you might want to switch your car for something with a lower monthly payment, or opt to pay for something less expensive with cash.
- Make a plan – put together a budget by figuring out how much and how often money should be set aside each month to achieve your financial goal. Once you’ve identified your big goals start taking steps to reach them.
- Always shop sales – never pay full price. Make sure it’s something you already need, not something you’re buying just because it’s on sale. You can also make alternative choices – go out for dinner and a movie, or Netflix and chill at home? Should you buy a brand new car, or buy a reliable used car? A simple alternative can make a big difference when it comes to saving.
- Keep the money you are saving in a separate account and make it automatic – it’s important to keep it in a safe place so you won’t spend it. No matter how disciplined you are, if it’s readily available or easy to access, it’s tempting.
- Take advantage of apps – There’s an app for everything! There are many apps for budgeting, local deals, saving for retirement, etc. Try not to get overwhelmed. Choose a couple that will help track savings.
Three apps that can simplify keeping track of finances:
• Mint– brings together everything from balances and bills to your credit score and more. It’s your financial life, in one place that’s easy to understand.
• Digit–Every few days, Digit checks your spending habits and removes a few dollars from your checking account if you can afford it. Easily withdraw your money any time, quickly and with no fees.
• Level Money–helps you plan ahead for essentials like rent and bills, and then lets you set a target savings goal.
- Get others involved – Join in on The Black Unicorn Project’s 2017 Savings Challenge by following us on Instagram or Facebook. Each week we provide you with the numbers for saving $20,000, $5,000, or $2,500 by the end of the year. You can even make it a friendly competition with a spouse, family member, or close friend.
Come up with a consequence for a bad spending habit. For example – Tim enjoys happy hour multiple times each week. For every $1 he spends on alcohol during January, he’ll match it with $1 deposited into savings. That should net him about $150 in a month. He can reduce his alcohol consumption or watch his savings grow. Win/win situation!
Be sure to check your progress weekly – you need to know where you stand with your finances so that you are aware if you are on track with your budget and goals. Set a recurring date weekly to monitor your progress. If you fall off track, don’t give up; just get back to it. It takes discipline to successfully achieve your financial goals. Once you get a system going and get the hang of it for a couple months, you’ll be proud to see your savings grow. When you’ve never truly had financial freedom and are able to access funds for their intended purpose, it’s an amazing feeling of accomplishment!
Now that you’re on your way to achieving your savings goals, be on the lookout for next month’s tips on how to live within your means and not feel limited.