I know you’re all thinking that it’s about time that we started talking about saving around here. We started by looking at our finances and figuring our where our money is going. Next, we took a hard look at the place we choose to store and manage our money. (Has anyone made the leap to a credit union? Today we are going to talk about how to take what we’ve learned and how to start saving money!
If you are reading this, you likely are in one of two places. 1. You already have a plan for saving but you wish you could save more or be more consistent with your savings. 2. You do not currently have a plan in place for saving. You have the best of intentions, but at the end of the month, there’s no money left over. We think we can help meet you where you are.
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First, let’s talk about WHY we should be saving money.
What should I save money for?
- Big purchases – a home or a car
- Holiday spending
- Emergencies (Layoff, home or car repairs, medical expenses. Essentially anything unexpected that life throws at you.)
- Non-monthly bills (insurance, property taxes, car registration – any bills that you don’t pay monthly and therefore haven’t factored into your monthly budget)
*We aren’t going to specifically address retirement saving here. I recommend you do three things if you’re not currently saving for retirement. 1. If your employer offers a 401(k) sign up now! 2. If not, look into opening a Roth IRA. 3. Speak to a financial advisor – get a referral from a friend for someone they like. This is the best way to figure out your best retirement saving options.
How many savings accounts should I have?
When we were newly married, we created several savings accounts for budgeting purposes. Savings accounts are often free so there it was a good way for us to keep track of our various savings goals. We had accounts for the following items: vacation, travel, holiday spending, non-monthly bills, and a general/emergency savings account.
Yes, you can track your contributions to each of these funds (or the funds that you designate for yourself) but this was the easiest way for us to see exactly how much money was in each fund.
How much money should I save?
A general rule of thumb says 20% of your income should go to savings. This includes retirement savings and is just a goal, not a hard and fast rule. It’s okay if that’s not realistic for you today. Any contribution is a good contribution. Start by looking at the budget you created. In theory, how much money should you have left over at the end of the month after expenses? That’s a great place to start when deciding how much to save.
Or, let’s you have a savings goal with a specific timeline, for example, saving for holiday spending. Take your final goal and divide it by the number of months you have to reach the goal and set aside that amount of money each month.
How do trim my budget and start saving?
If you were shocked by the amount of money you’re spending monthly, you’re not alone! While some costs are harder to change, like your rent or mortgage payment, other costs definitely have some room for trimming! Here are a few ideas to get you started.
- Get on the phone! – Call your cable or cell phone provider and see what deals they can offer you. Do you really need to be paying for HBO every month? Is it time to cut the cable cord completely?
- Cancel services you aren’t utilizing. This year alone we canceled a pest-control service, Amazon Prime and our gardening service. Last year we both canceled the many subscription boxes we were receiving. Are you paying for an Audible subscription when your library has a great selection?
- Track every dollar that you spend. This, along with using cash has been one of the single greatest ways for us to stay on track. By recording every dollar that we spend, we are always aware of how much we have left in our budget for the month, and it’s much harder to overspend. For us, this means using a paper checkbook, but for others apps like Every Dollar and You Need a Budget will do the trick.
How can I avoid over-spending?
- Use cash! For YEARS, we used cash for all non-essential spending. We each had an “allowance” of money that we could spend however we wanted and we always took that amount out in cash. We did the same with our entertainment money for the month. When it’s gone, it’s gone!
- Look at your spending with a critical eye. Do you go to Starbucks every morning because it’s easy, but you have a fancy espresso machine sitting in your kitchen? We don’t want you to cut out all of the things that bring you joy, but we want you to think about the things that are important to you and eliminate the things that are not.
I can’t seem to stick to a grocery budget.
- Order groceries online! Ordering groceries for pickup via Walmart has been the single greatest thing I’ve done for myself this year. Not only does it cut down on the time I spend in the grocery store, it also keeps me accountable to our grocery budget. I can see the total in real time as I add items to my cart and I can easily remove items that are putting me over budget. Plus, staying out of the store curbs impulse shopping! You can get $10 off by ordering via our link!
- Meal plan! Rather than buying a bunch of food without any idea what you’ll do with it, use a meal planning service. We love eMeals because the meals are budget-friendly and they integrate with grocery delivery and pickup services to make shopping a breeze.
How can I start saving?
I always spend the money I was planning to save!
You and every other human on the planet. This is where a system of “out of sight, out of mind” comes in handy. Once you’ve decided how much to save and what you’re saving for, make a plan for distributing that money to your savings accounts as soon as it hits the bank. No, not a week later. No, not at the end of the month. Get it out of sight immediately. The money is still yours and can be accessed if you need it, but keeping it out of your checking account will keep you from thinking that this is money that still needs to be spent.
Automate your saving
Like we mentioned above, you can create automatic transfers at your bank that will transfer a set amount of money every month. For us, it happens on payday. Money comes in and immediately disappears. But, there are ways to be even more hands off with your savings!
Apps like Digit do the work for you! Connect your bank account and it will analyze your saving and start making transfers from your checking account to your Digit account. You can access that money at any time, so there’s no fear that it will accidentally take too much money. You can set goals and work toward them within the app.