7 Tips on Saving Money

The most valuable tip I ever received about saving money was “decide it’s a good idea.” Once I decided that saving money was, indeed, a good thing to do, I set about finding ways and means to make it happen. Here’s some valuable tips on saving money:

One – decide that you want to save. Find your reason and you’ll find the motivation to do the things necessary to saving. Debt is a good reason, but “debt” can also be something that drives people into further debt. Large debt can seem so large as to be impossible to attack and what savings can be scraped together too little to help. Maybe a more positive reason could be that you desire to be financially healthy. Reduce debt, make better spending choices, begin donating to charitable causes…the desire to put together a healthy financial picture could be a good motivator to begin saving.

Two – find out where you are right now. There are three main tasks to do to achieve this: 1) list out all your income from all sources; 2) list out all your out flow in all categories [which includes your “casual” spending – the $2 newspaper and the $7 coffees]; and 3) go through your home and find all the “hidden” money – everything from the jars of loose change to the odd birthday gift check you stuffed into a drawer. Do the math and find out if you are currently in the red or in the black and by how much.

Three – Decide upon your financial priorities. Do you want to increase your savings account? Are you wanting to put cash into a money market fund? Do you want to put money into a second, home-based business? Do you have debt that really does need eliminating? Write down your priorities.

Four – draw up an annual, monthly and weekly budget; in fact, draw up two of them. The first one will be according to your present spending and savings habits, the second one will be the “ideal,” the budget you’d like to have. Now you are ready to do some real work.

Five – Based upon your financial priorities, set some plans in action to achieve them. If debt reduction is your goal, then some hard choices need to be made: 1)recognize that credit is actually debt and cut up all your credit cards except one. Keep the one with the best interest rate and tuck it into a locked box – this is for catastrophic emergencies only; 2)trim your living expenses back and funnel the saved money into paying off debts – for example, give up expensive coffees for home-brewed – the cash difference goes to pay off debt; 3)put off any purchases that are not necessities and cut all luxuries until your debt is paid off. House, car and school loan payments are not in the debt category at this point – credit card debt is. If increasing savings is important and you don’t have debt to pay off, then finding more income is key – maybe a second, home-based business would bring in the desired income. A second, home-based business may also bring in income that can pay off debt.

Six – make some new habits in spending and savings. Maybe what you need is a lifestyle “makeover.” Maybe something you’ve always wanted to do is to be philanthropic but thought you never could because you weren’t “rich.” A $25 check to your favorite charity every month, as part of your monthly budget, will begin to build that habit. Maybe it isn’t so much that you “waste” money, but that you don’t spend it correctly. As example, decide that eating out five times a month is actually an extravagance that is not necessary. Replace that time with time at home cooking together.

Seven – decide that money is just a tool. Many people fear money, many crave money. But money is just a tool that our society uses as an exchange for goods and services. Take money out of the spotlight and put it in its proper category.