How to Save Money: Consumer Money Management
Most people want the financial freedom to live life and do more than just the ordinary. You might, therefore, start new year planning to save more, spend less, and give a little bit more. Money, however, is one of the hardest things to manage. That is why most financial resolutions are often in tatters before groundhog day. Nevertheless, if the people that inspire us like Robert F. Smith or Jay Z can get a handle on their finances and become great, so can you. This is how to save money essay where I will share some tips how anyone can begin your walk to financial freedom.
Goal setting at the beginning of the year is a very divisive topic. One school of thought says that resolutions can be made at any point of the year, noting that the beginning of the year is simply an arbitrary moment. Moreover, research shows that goal-setting at new year could be counterproductive for most people. Goal setting, however, is a very critical component of the savings culture. All that you need to do is to set a simple, actionable plan. Research says that a plan that begins with small steps can inspire you to accomplish your resolutions. Therefore, to help you save more, we have outlined small steps that can help save a lump sum by the end of the coming year.
The first step towards establishing a savings culture is to have a run-through of your finances. This is a very common piece of advice, and you might be tempted to overlook it. However, few things are as jarring as staring at the staggering amount of money that you have spent on hundreds of cups of coffee. Yes, make your coffee at home! It is crucial to get an overview of your spending habits because the money spent on frivolities could go a long way in boosting your finances. So, get out your diary, spending tracker app or spreadsheet, and begin to track single coin spent.
Set a Budget
Now that you know how much money you spend in a month organize all your expenses into a budget. Put aside a minimum of 10% to 15% of your earnings as savings and leave some savings for irregular expenses such as car maintenance.
Cut Down on Spending
If you go back to your expenses tracker, diary, or spreadsheet and realize that you are living beyond your means, you need to cut back on spending. This will help you to save more. Therefore, pore over your records and begin to eliminate items such as dining out or entertainment. Cancel unnecessary subscriptions and institute no spend days for more savings and use coupons and cheap eats dinners where necessary.
Set Goals and Automate Savings
Subdivide your future financial goals into long and short-term goals. The short-term goals should involve savings for emergencies, car down payments, or vacations. Your long-term goals, on the other hand, should be about retirement, children's education, or home mortgage down payment. Save short-term savings funds in savings accounts and long term goals savings funds in 529 plan or IRA accounts. Automate your checking and savings accounts operations to minimize off-budget spending.
What Are The Rules to Live By For Money Management?
Now, once you have the basics of savings ready, below are some financial rules to live by that will tackle any persistent money shortage problems.
Spend less than what you earn - Do you know that almost 80% of all American workers live paycheck to paycheck? Moreover, it is not just the lowly paid workers who are facing this struggle. Data shows that amongst American workers that earn over $100,000 and more each month, 10% of them live paycheck to paycheck as well. It is, therefore, very apparent that most households do not have much left to save by the end of pay week. This is why savings are at an all-time low, such that over 61% of all household breadwinners do not have much in their rainy day kitty. So what is the solution? If you are currently living from one paycheck to the other, meaning that you cannot save, you need to either reduce spending or increase your income. You could, therefore, take on side jobs, ask for a raise, work overtime, or launch a new business. Alternatively, cut down on spending and live within your budget.
Save for a rainy day - If there is one thing that you should be prepared for is an emergency. As sure as the sun rises every morning, someday, the unexpected financial crisis will happen. A survey shows that the median cost of a household financial shock could go up to $2000. Most families have less than $500 saved in their rainy day account. Without emergency savings, you will be caught up in an expensive credit card debt cycle, which is very difficult to overcome. Therefore, stash away at least three to six months of your living expenses and avoid credit for emergencies.
Save for your retirement - Most families have nothing or very little saved for retirement. Old age is, however, assured, and you will not have the energy that you have right now to eke a living then. So prioritize retirement savings. Once you have your essentials bills paid, send a portion of your money to your IRA or 401(k) account. A good figure is at least 15% of your earnings. You do not have to start that high but work towards this goal. Keep working on your savings until you have hit your retirement savings goals.
Ti sum up methods for saving money, informative essay, these rules are not easy to live by, but with a level of discipline, they can make you financially secure. They will guide you to future financial maturity and allow you to rise even higher and join the club of the financially successful.