It’s easy to understand why saving more money is one of the most popular New Year’s resolutions. What’s not so easy is actually finding a way to do it! If you’re struggling with fulfilling your goal to spend less and save more, take comfort in knowing that it’s not just a matter of willpower. Instead, just like any other skill, saving money takes knowledge, practice and planning. Here are a few tips to help you learn how to cut back on your spending and actually save the extra cash.
Track Your Spending
It doesn’t matter if you use a simple notebook or an online program like Mint, the important thing is to have a very clear picture of where your money goes – and why. Are you spending too much on restaurant meals because your family is famished after a long day of school and work and it’s easier and faster to order a pizza or go out for Chinese? Do you spend a fortune on gas because you are constantly running errands all over town? Are you hit with multiple late fees every month because you forget to pay your bills on time?
Once you learn your money drains and figure out why these are problem areas for you, it becomes easier to come up with a solution that will fit into your lifestyle. For example, if eating out is your weak spot, look into meal planning, crock pot cooking and asking other family members to pitch it. (For more tips, check out 6 Ways to Avoid the Temptation to Eat Out). If you are spending too much money on gas, look into carpooling, taking public transportation, consolidating your errands and biking. Avoid late fees by automating your spending and taking advantage of your bank or credit union’s bill pay service.
Use Cash Only
It’s all too easy to spend more than we wanted to when paying with a debit or credit card. Carrying only the amount of cash that we intend to spend makes us more mindful and deliberate about what we choose to buy. It’s far less likely that we’ll blow the grocery budget on chips and soda if that means we won’t have enough left over to buy toilet paper and milk.
Some people modify the cash only system by purchasing gift cards for the grocery store, gas station and restaurants. These cards can usually be reloaded (to avoid the problem of what to do with $1.17 left on the card) and registered to help protect against theft and loss. There are advantages and disadvantages to using gift cards over cash, so be sure to read each merchant’s terms and conditions for using the cards before making the decision.
Bank Your Savings First
Many people make the mistake of thinking that whatever they don’t manage to spend each pay period should be their savings. As you can imagine, for many of us, our spending can easily expand to take care of any amount of cash we come into! For best results, automate your savings so that it’s immediately transferred to your savings account as soon as you get paid. You can either do this through a standing transfer with your bank or credit union or change the allotments on your direct deposit through your employer.
Out of sight, out of mind works very well for most people, but some need to go an additional step and make their savings hard to get to. This could mean keeping your savings in an account without ATM access so that you’ll have to slow down and really consider how badly you need this cash before withdrawing it.
Aim for One Thing a Week
Instead of trying to completely overhaul your finances all at once, try scheduling one hour or two a week to improving your finances. For example, week one you spend that hour on the phone with your cable provider asking for a lower rate (or alternatively, look for an online broadband promotion). The second week you spend that hour making a spreadsheet of easy to prepare dinners to help you in your future menu planning. Personal finance blogs like MoneyNing.com are a great source of ideas for your weekly projects.
Aim for sustainable improvement rather than a rapid, complete change and you’ll increase your chance of success. Trying to do too much all at once is overwhelming and hard to maintain in the long run. Remember, the goal is to save money all year long, not just in the first two or three weeks of January!