How to Save Money

In today’s economy more and more people are living paycheck to paycheck.  It’s getting harder to stretch a family’s income and keep food on the table.  Do you have trouble with bills and debt? Well it doesn’t have to be that way.  There are a lot of things you can do to stop living paycheck to paycheck, pay off debt, and start saving for the future. 

The first thing you have to do is start looking at your spending.  Where is all of your money going?  Figure out how much you spend on gas, groceries, bills and anything else that regularly comes out of your monthly earnings.  What about the extra’s like that coffee you stop and get on your way to work each morning or those new shoes you just had to have.  Take a month or two and write everything down, every penny, you’d be surprised how fast little spending adds up.

After carefully documenting where your money is going, it’s time to make a budget.  To do this you will have to distinguish what you need from what you want, and may have to go without some things that aren’t a necessity once in a while.

Start with your bills, figure out the average amount that you will need for things like water, electricity, and gas, and then make sure you know your monthly rent or mortgage payment.  Subtract these expenses from your monthly earnings. Next it’s time to figure out your non bill needs such as gas and groceries.  If you have been writing down what you spend for a month or two this will be easy.  Once you have an average for each, write these into your budget and subtract these from your monthly earnings. Now for wants.  Cell phones, cable, and internet.  All things that we can do without, yet most of us wont, but that’s okay because with good budgeting you don’t have too.  First make sure you are getting a good deal, many companies, such as Time Warner offer promotional packages,  unless you are locked into a contract don’t be afraid to switch providers when you see a good promotion.  Same goes for cell phones.   Figure out your monthly spending on these and add them to your budget, also subtracting them from your expenses.   

Next we’ll look at how to pay those credit cards and loans off to make you debt free.   Some people will tell you to pay off your card or loan with the highest interest rate first, but by paying off the loan you owe the least on first, you’ll be able to make higher payments on your other debts. Here is an example:
    Say that you owe $500 on card A, and it has an interest rate of 15%.  On card B you owe $1800 with an interest rate of 20%.  If   your minimum payment is $100 on both cards A and B, but you have extra money at the end of the month you want to put towards one of the cards, put it towards card A.  By doing this you could quickly pay off card A, once card A is paid off, you use the $100 you were putting towards card A, towards card B, so now you are making a $200 payment on card B.  This is the way to fast debt payoff.

Now that we’ve looked at budgeting for monthly expenses and the best way to start paying off your debt lets tackle savings.   It’s easy to look at your bank account, see how much you have left after your monthly expensive, and say you will put any left over money into savings at the end of the month.  By doing this you are opening yourself up to unnecessary spending.  One thing that can’t be stressed enough is pay yourself first.  Once you know how much you will have left after your normal expenses, take percentage of what’s left and put it in savings before you ever get the chance to spend it.  Moving 50-60 percent of what’s left after expenses to your savings account is a good place to start.

There are a few things to do with the remainder of your income after monthly expenses (you should treat what you put into savings each month as an expense).  You can put even more towards paying off that debt, you can also give yourself a weekly cash ‘allowance’.  By withdrawing a set amount each week for personal spending, you can make sure you don’t go over your budgeted amount.  Say you pull out $30 in cash on Monday, you’d have to make that $30 last until the next money when you pull out another $30.  By not allowing yourself to spend money once your $30 is gone, you prevent careless spending.

A few other tips for saving money

Utilize coupons, coupons can be your best friend, by saving money on groceries, you can put extra money towards debt Skip that every morning stop for coffee and bring it from home in a coffee mug, Skip a fancy meal on date night and go on a picnic, not only are you saving money, but it brings romance to the meal Make a meal plan, by being able to buy all you need for a week or even a month, in a single grocery trip, you can minimize those last minute stops at the grocery store, which can add up very fast.  Not to mention saving on gas by making less trips.

Money management can seem like a foreign language sometimes, but when you break it down, take it slow, and budget correctly, you can go from living paycheck to paycheck, to debt free with a good chunk of money (ideally at least 6 months of expenses) in the bank for emergencies.  Learning to strategically manage your money is a skill that can better the future for you and your family.