Not everyone is a dab hand at saving money, here is how to manage money successfully.
Before you start saving money you need to figure out what you’re spending in a month. Keep track of all your expenses – from every coffee to newspaper. You want to be able to account for every penny – or at least try to. Once you have all the figures organise them into categories such as groceries, mortgage/rent etc. and calculate a total for each. It’s sometimes easier if you use bank statements to help you with this.
Make a Budget
Once you figure out how much you spend a month you can begin to organise your recorded expenses into a manageable budget. Your budget should outline how your expenses affect your income. This will allow you to plan your spending and limit how much you overspend. In addition to monthly expenses make sure you factor in expenses that occur regularly but not every month such as car maintenance.
Plan on Saving Money
After you’ve made a budget create a separate savings category within it. You should try and put away 10-15% of your income as savings. If your expenses are too high and you can’t save that much you might want to think about cutting back on your expenditure. You can do this by identifying non-essential items or things that you can spend less on – such as eating out. To get into a good habit of saving money by considering savings to be a regular expense.
Choose Something to Save For
Setting a goal for what you’re going to do with the money is an excellent way to save. Think about what you want to save for – such as a holiday or a new car – then figure out how long it’s going to take to save for it.
- Emergency fund (6-9 months of living expenses)
- Down payment for car
- Childs education
- Down payment on a home/a remodelling project
Decide on Priorities
Your goals are likely to have the biggest impact on how you save money – after expenses and income. Don’t put long-term goals on the back seat in order to fulfil short-term goals. Always try and plan ahead, for example, if you know your boiler is going to need replacing, or your car is on its last legs, start saving for it in advance, rather than waiting until it’s too late.
Pick the Right Tools
For Short-Term Goals Consider;
- Regular savings account
- High yield savings account (high interest)
- Bank money market savings account
- Certificate of deposit (CD)
For Long-Term Goals Consider;
- Insured individual retirement accounts (IRAs)
- Security such as stocks or mutual funds
Make Saving Automatic
Nearly all banks offer automated transfers between checking and savings accounts, it’s up to you to decide when, how much and where to transfer the money to. You can even split it between multiple accounts. These automated transfers are a great way to get you into the habit of saving so you aren’t tempted to spend the money.