How to Budget Better & Save Money
Budgeting is a great goal to have and one that many people set out to accomplish each year. A budget and an emergency savings fund can be beneficial for so many reasons including unforeseeable medical expenses, car repairs, or something fun like a much-needed vacation. A helpful step in establishing a budget for these types of expenses is: to assess and understand exactly how much money you have and where it is going. So if one of your goals has been to save more money, here are a few things to consider and some tips to help you start accomplishing your budgeting goals.
Determine Where Your Money Goes
Do you ever wonder where all of your paycheck disappears to? Of course, you expect your rent or mortgage, utilities, groceries, debt repayments, and other monthly bills. But what about the rest?
Fees: Something we often forget to think about are the additional, sometimes hidden fees of memberships, banks and/or subscriptions. For example, does your checking account have a monthly, debit card or ATM fee? Do you get charged if your accounts have below a certain amount in them? Always check with your bank on the fee policies associated with your accounts so you know where your money is and deductions are not a surprise. And, if you’re searching for a new bank, be sure to inquire about these potential costs as you consider your options.
Automatic renewals: Many of your provided services, subscriptions and annual fees can be set up with an automated payment system for automatic renewal. While this is a convenient option if you would otherwise forget to pay on time, you run the risk of incurring the cost if you forget to cancel after you no longer require the service. For example, if you no longer need a streaming service or you don’t go to a certain gym anymore, cancel the membership and put the monthly funds towards your savings instead. Take the time to review your renewals and make sure you are still using the service — if not, you can cut the cost. Over the course of a year, this could be as much as $120 or more that you have added to your savings account!
Dining expenses: As much as everyone loves indulging, thinking about that morning coffee or $4 bagel on your way to work in terms of your budget can help you cut costs. Oftentimes people get in the habit of spending money as part of their routine (e.g., a daily lunch outing, swinging through a drive-thru or ordering a pizza every night for dinner) and do not realize how much or how quickly the cost can add up. A few dollars here or there may not seem like much, but over the course of a week or a month, it has the potential to add up to hundreds of dollars. Consider cutting down on fast food or coffee runs by packing a lunch (maybe leftovers from last night’s dinner) or making your caffeine source at home. Assess how much you are spending on food/drink outside of your weekly grocery bill and actively work to lower the amount by being conscious. If you struggle with self-discipline in this way, maybe allow yourself a designated amount per week to either dine out or spend on to-go costs and put the rest directly into savings.
How to Save More
Aside from canceling any outstanding auto-renewals and cutting down on your fast food expenses, there are other tricks you can follow to save more money and build up your savings account for emergencies or fun.
First, have something in mind that you would like to save for; it can be helpful to have a goal or something to look forward to. Of course, it is more fun to save for something like a new TV or a trip to Disney World, but even if you simply decide to save for the sake of having a larger balance in your savings account, you might feel more secure and accomplished. Knowing the reason behind your saving efforts can help you prioritize your overall goal when it comes to making financial decisions, however big or small.
Next, have a dedicated account, like a savings account or an individual retirement account (IRA). This can keep the money away from your everyday expense account, making it more difficult to access and therefore spend the money you’ve saved. Sometimes companies or banks are able to deduct a certain amount from your paycheck automatically to put directly into your savings account.
Last, make savings automatic. You can set up automatic transfers each month from your checking account to your savings account. Another way you can do this is to have your direct deposit split up so money is immediately taken from your paycheck and put into your savings account without you having to think about it. In this way, you can save money without having to worry about remembering to do so.