It’s that time of year again – a time for resolutions and the promise to become slightly better versions of ourselves.
One area many people focus on tackling is finances. The media will tell us that the economic climate is increasingly dire. Bankrate’s most recent Financial Security Index reckons that in America almost 28% of adults have no savings, and 25% have a so-called rainy-day fund that can’t cover three months’ worth of living expenses. It’s a harrowing thought.
However, wrestling your debt into a half Nelson is possible provided you make a few changes (that work for you) and understanding it’s a marathon, not a sprint.
1. Have a Goal
Saving money will come a lot easier when you have a clear goal in mind. You need to be very specific. “Save 20% of house down payment” is a lot more precise than “save money.” You need to be very honest with yourself about your goals and deadlines and then break down each goal by month to make them more manageable.
2. Track Non-Essential Spending
It’s going to be impossible to work out how much money you can put away each month if you don’t know where it goes. During the month split your expenses into “essentials” and “non-essentials.”
Your essentials are generally your fixed expenses – rent, loans, car payments, groceries – and the total amount is unlikely to deviate much month to month. Your non-essentials are more sporadic – the occasional birthday present, your morning mocha, tickets and nights out.
It’s your non-essentials that will give you the most wriggle room for saving. Can you cut back on eating out and instead cook at home a few more nights a week? Does your apartment building have a suitable gym instead of forking out for a membership?
Ideally, 10-20% of each salary should be put away, and many people adopt the 50-30-20 rule, which means 50% of your take-home to go toward essentials; 30% toward non-essentials; and 20% toward savings.
There are a number of apps that can help you track your spending as well, if the thought of managing it is overwhelming.3. Tackle Interest on Debt
While saving and budgeting can be adapted to suit each person with their own individual needs, the consensus of them all is to sort out high-interest debt ASAP. This generally pertains to credit cards – it’s not enough to make the minimum payment, you need to account for the interest rate that will add up as well. The longer you take to pay it off, the more it costs you in the long run. Once that debt is cleared, you can allocate what you were paying towards it to savings.
If you can, schedule a set amount of money to move from your current account to a designated savings account each month. This will stop you spending it because you won’t need to remember to send it across each month.
5. Wait 24 Hours When Shopping Online
Listen, as somebody who has fully embraced the world of online retail, I know better than anyone how quickly your cart can fill up and how easy it is to click that checkout button and then pretend nothing even happened. Even putting stuff in your cart “for later” is a slippery slope.
Put a 24-hour freeze on shopping when you’re browsing online. Just give it a day. If you go back after those 24 hours are up and rethink your purchases, you may realise you didn’t even need them.
6. Get a buddy
Saving money is not easy. If it were, everyone would do it and there wouldn’t be the demand for knowledge that there is.
For a long time there has been a stigma around discussing finances or any difficulties associated with saving, getting out of debt, or even just making ends meet. Thankfully, financial literacy is a more acceptable conversation topic. Find a friend of co-worker who is also trying to save and ask them to be your accountability partner to help motivate you to stick to your plan. Sometimes just knowing you have support makes saving money a less daunting ordeal.