How to Save Money and pay yourself at the same time
Saving money is one of those tasks that's so much easier said than done. There's more
to it than spending less money (although that part alone can be challenging). How much
money will you save, where will you put it, and how can you make sure it stays there?
Here's how to set realistic goals, keep your spending in check, and pay yourself first.
Steps
1. Set savings goals. For short-term goals, this is easy. If you want to buy a video
game, find out how much it costs; if you want to buy a house, determine how much of a
down payment you’ll need. For long-term goals, such as retirement, you’ll need to do a lot
more planning (figuring out how much money you’ll need to live comfortably for 20 or 30
years after you stop working), and you’ll also need to figure out how investments will help
you achieve your goals.
Kill your debt first. Simply calculating how much you spend each month on your debts will
illustrate that eliminating debt is the fastest way to free up money. Once the money is
freed from debt payment, it can easily be re-purposed to savings.
2. Establish a time-frame. For example: "I want to be able to buy a house two years
from today." Set a particular date for accomplishing shorter-term goals, and make sure
the goal is attainable within that time period. If it’s not attainable, you’ll just get
discouraged.
3. Figure out how much you’ll have to save per week, per month, or per paycheck to
attain each of your savings goals. Take each thing you want to save for and figure out
how much you need to start saving now. For most savings goals, it’s best to save the
same amount each period. For example, if you want to put a $20,000 down payment on a
home in 36 months (three years), you’ll need to save about $550 per month every month.
But if your paychecks amount to $1000, it might not be a realistic goal, so adjust your time-
frame until you come up with an approachable amount.
4. Keep a record of your expenses. What you save falls between two activities and
their difference: how much you make and how much you spend. Since you have more
control over how much you spend, it's wise to take a critical look at your expenses. Write
down everything you spend your money on for a couple weeks or a month. Be as detailed
as possible, and try not to leave out small purchases. Assign each purchase or
expenditure a category such as: Rent, Car insurance, Car payments, Phone Bill, Cable
Bill, Utilities, Gas, Food, Entertainment, etc.
Keep a small notebook with you at all times. Get in the habit of recording every expense
and saving the receipts.
Sit down once a week with your small notebook and receipts. Record your expenses in a
larger notebook or a spreadsheet program.
5. Trim your expenses. Take a good, hard look at your spending records after a
month or two have passed. You’ll probably be surprised when you look back at your
record of expenses: $300 on ice cream, $100 on parking tickets? You’ll likely see some
obvious cuts you can make. Depending on how much you need to save, however, you
may need to make some difficult decisions. Think about your priorities, and make cuts you
can live with. Calculate how much those cuts will save you per year, and you'll be much
more motivated to pinch pennies.
Can you move to a less expensive apartment or house?
Can you refinance your mortgage?
Can you consolidate your debts so that you're not paying as much interest?
Can you save money on gas, or give up a car altogether?
Can you live with only one car?
Can you get a better price on insurance?
Can you drop a land line and either only use your cell phone.
Can you live without cable or satellite TV?
Can you cut down on your utility bills?
Can you restrict eating out? Online coupons have become very attractive, shop them.
6. Reassess your savings goals. Subtract your expenses (the ones you can't live
without) from your take-home income (i.e. after taxes have been taken out). What is the
difference? And does it match up with your savings goals? Let's say you've decided you
can definitely get by on $1500 per month, and your paychecks amount to $2300 per
month. That leaves you with $800 to save. If there’s absolutely no way you can fit all your
savings goals into your budget, take a look at what you’re saving for and cut the less
important things or adjust the time-frame. Maybe you need to put off buying a new car for
another year, or maybe you don’t really need a big-screen TV that badly.
7. Make a budget. Once you’ve managed to balance your earnings with your savings
goals and spending, write down a budget so you’ll know each month or each paycheck
how much you can spend on any given thing or category of things. This is especially
important for expenses which tend to fluctuate, or which you know you're going to have a
particularly hard time restricting. (E.g. "I will only spend $30 a month on
movies/chocolate/coffee/etc.") Manufactures offer a lot though online surveys, all it takes
is a little time to get that offer.
8. Stop using credit cards. Pay for everything with cash or money orders. Don't even
use checks. It's easier to overspend when you're pulling from a bank or credit account
because you don't know exactly how much is in there. If you have cash, you can see your
supply running low. You can even bundle up the predetermined amount of cash allocated
for each expense with a label or keep separate jars for each expense (e.g. a bundle/jar
for coffee, another for gas, another for miscellaneous). As you pull money from a jar for
that particular expense, you'll see how much remains and you'll also be reminded of your
limit.
If you need to have credit cards but you don't want the temptation of having them
available to use day-to-day, restrict that section of your wallet with a note or picture
reminding you of your savings goals.
Credit cards are not inherently evil; it's all about your self control. If you use them
responsibly (i.e. completely pay them off every month), you can benefit from them. But the
reason most credit card companies make money, however, is because people end up
spending money that they don't have. Unless you are one of the people who can
religiously pay off the balance in full every month, you're better off foregoing the
promotions that credit card companies use to lure you in (cash back, introductory APR,
airline miles, and so on).
9. Open an interest-bearing savings account. It’s a lot easier to keep track of your
savings if you have them separate from your spending money. You can also usually get
better interest on savings accounts than on checking accounts (if you get interest on your
checking account at all). Consider higher-interest options such as CDs or money-market
accounts for longer savings goals.
10. Know where your money is. And how much of it, too. If you accidentally overdraw
your bank account, you will incur hefty bank fees; worse yet, the place you paid with that
check may slap a bounced check fee on top of that, and send the check in again,
resulting in a second overdraft fee from the bank! So just a few cents missing to cover
that check could result in over $100 in fees. To avoid that, you should always know how
much money you've got in your account(s), so you never cut a check for more than what
you have.
Look into checking and savings accounts that pay interest. Also, consider CDs
(certificates of deposit) for longer-term savings with low risk.
11. Pay yourself first. Savings should be your priority, so don’t just say that you’ll
save whatever is left over at the end of the month. Deposit savings into an account (or
your piggy-bank) as soon as you get paid. An easy, effective way to start saving is to
simply deposit 10% of every check in a savings account. If you get a check or sum of
cash, say 710.68, move the decimal point one place to the left and deposit that amount:
71.07. This works well and requires little thought; over several years, you've a tidy sum in
savings. Over decades, you'll be a millionaire.
You can set up an automatic transfer from your checking account to your savings account.
Many employers allow you to deduct savings from your paycheck. The money is directly
deposited in your savings account so you never even see it on your paycheck.
You can also have investments for retirement taken directly out of your pay, and the taxes
may be deferred with this option.
Saving money is one of those tasks that's so much easier said than done. There's more
to it than spending less money (although that part alone can be challenging). How much
money will you save, where will you put it, and how can you make sure it stays there?
Here's how to set realistic goals, keep your spending in check, and pay yourself first.
Steps
1. Set savings goals. For short-term goals, this is easy. If you want to buy a video
game, find out how much it costs; if you want to buy a house, determine how much of a
down payment you’ll need. For long-term goals, such as retirement, you’ll need to do a lot
more planning (figuring out how much money you’ll need to live comfortably for 20 or 30
years after you stop working), and you’ll also need to figure out how investments will help
you achieve your goals.
Kill your debt first. Simply calculating how much you spend each month on your debts will
illustrate that eliminating debt is the fastest way to free up money. Once the money is
freed from debt payment, it can easily be re-purposed to savings.
2. Establish a time-frame. For example: "I want to be able to buy a house two years
from today." Set a particular date for accomplishing shorter-term goals, and make sure
the goal is attainable within that time period. If it’s not attainable, you’ll just get
discouraged.
3. Figure out how much you’ll have to save per week, per month, or per paycheck to
attain each of your savings goals. Take each thing you want to save for and figure out
how much you need to start saving now. For most savings goals, it’s best to save the
same amount each period. For example, if you want to put a $20,000 down payment on a
home in 36 months (three years), you’ll need to save about $550 per month every month.
But if your paychecks amount to $1000, it might not be a realistic goal, so adjust your time-
frame until you come up with an approachable amount.
4. Keep a record of your expenses. What you save falls between two activities and
their difference: how much you make and how much you spend. Since you have more
control over how much you spend, it's wise to take a critical look at your expenses. Write
down everything you spend your money on for a couple weeks or a month. Be as detailed
as possible, and try not to leave out small purchases. Assign each purchase or
expenditure a category such as: Rent, Car insurance, Car payments, Phone Bill, Cable
Bill, Utilities, Gas, Food, Entertainment, etc.
Keep a small notebook with you at all times. Get in the habit of recording every expense
and saving the receipts.
Sit down once a week with your small notebook and receipts. Record your expenses in a
larger notebook or a spreadsheet program.
5. Trim your expenses. Take a good, hard look at your spending records after a
month or two have passed. You’ll probably be surprised when you look back at your
record of expenses: $300 on ice cream, $100 on parking tickets? You’ll likely see some
obvious cuts you can make. Depending on how much you need to save, however, you
may need to make some difficult decisions. Think about your priorities, and make cuts you
can live with. Calculate how much those cuts will save you per year, and you'll be much
more motivated to pinch pennies.
Can you move to a less expensive apartment or house?
Can you refinance your mortgage?
Can you consolidate your debts so that you're not paying as much interest?
Can you save money on gas, or give up a car altogether?
Can you live with only one car?
Can you get a better price on insurance?
Can you drop a land line and either only use your cell phone.
Can you live without cable or satellite TV?
Can you cut down on your utility bills?
Can you restrict eating out? Online coupons have become very attractive, shop them.
6. Reassess your savings goals. Subtract your expenses (the ones you can't live
without) from your take-home income (i.e. after taxes have been taken out). What is the
difference? And does it match up with your savings goals? Let's say you've decided you
can definitely get by on $1500 per month, and your paychecks amount to $2300 per
month. That leaves you with $800 to save. If there’s absolutely no way you can fit all your
savings goals into your budget, take a look at what you’re saving for and cut the less
important things or adjust the time-frame. Maybe you need to put off buying a new car for
another year, or maybe you don’t really need a big-screen TV that badly.
7. Make a budget. Once you’ve managed to balance your earnings with your savings
goals and spending, write down a budget so you’ll know each month or each paycheck
how much you can spend on any given thing or category of things. This is especially
important for expenses which tend to fluctuate, or which you know you're going to have a
particularly hard time restricting. (E.g. "I will only spend $30 a month on
movies/chocolate/coffee/etc.") Manufactures offer a lot though online surveys, all it takes
is a little time to get that offer.
8. Stop using credit cards. Pay for everything with cash or money orders. Don't even
use checks. It's easier to overspend when you're pulling from a bank or credit account
because you don't know exactly how much is in there. If you have cash, you can see your
supply running low. You can even bundle up the predetermined amount of cash allocated
for each expense with a label or keep separate jars for each expense (e.g. a bundle/jar
for coffee, another for gas, another for miscellaneous). As you pull money from a jar for
that particular expense, you'll see how much remains and you'll also be reminded of your
limit.
If you need to have credit cards but you don't want the temptation of having them
available to use day-to-day, restrict that section of your wallet with a note or picture
reminding you of your savings goals.
Credit cards are not inherently evil; it's all about your self control. If you use them
responsibly (i.e. completely pay them off every month), you can benefit from them. But the
reason most credit card companies make money, however, is because people end up
spending money that they don't have. Unless you are one of the people who can
religiously pay off the balance in full every month, you're better off foregoing the
promotions that credit card companies use to lure you in (cash back, introductory APR,
airline miles, and so on).
9. Open an interest-bearing savings account. It’s a lot easier to keep track of your
savings if you have them separate from your spending money. You can also usually get
better interest on savings accounts than on checking accounts (if you get interest on your
checking account at all). Consider higher-interest options such as CDs or money-market
accounts for longer savings goals.
10. Know where your money is. And how much of it, too. If you accidentally overdraw
your bank account, you will incur hefty bank fees; worse yet, the place you paid with that
check may slap a bounced check fee on top of that, and send the check in again,
resulting in a second overdraft fee from the bank! So just a few cents missing to cover
that check could result in over $100 in fees. To avoid that, you should always know how
much money you've got in your account(s), so you never cut a check for more than what
you have.
Look into checking and savings accounts that pay interest. Also, consider CDs
(certificates of deposit) for longer-term savings with low risk.
11. Pay yourself first. Savings should be your priority, so don’t just say that you’ll
save whatever is left over at the end of the month. Deposit savings into an account (or
your piggy-bank) as soon as you get paid. An easy, effective way to start saving is to
simply deposit 10% of every check in a savings account. If you get a check or sum of
cash, say 710.68, move the decimal point one place to the left and deposit that amount:
71.07. This works well and requires little thought; over several years, you've a tidy sum in
savings. Over decades, you'll be a millionaire.
You can set up an automatic transfer from your checking account to your savings account.
Many employers allow you to deduct savings from your paycheck. The money is directly
deposited in your savings account so you never even see it on your paycheck.
You can also have investments for retirement taken directly out of your pay, and the taxes
may be deferred with this option.
How to Apply for a Loan
1. Download your credit report and learn your credit score. Check for inaccuracies in
your report, which you'll need to have fixed. Knowing your credit score will give you an
idea of the rates for which you'll qualify. In fact, some lenders even post what rates
each credit score range will likely receive.
2. Gather your personal information, including contact information, Social Security
number , monthly and yearly income totals, proof of income, previous two years' tax
returns and list of assets.
3. Find the loan application or applications pertaining to your desired loan, whether
it's a home equity loan, personal loan, or small business loan. Your local bank as well
as online lenders have applications for a variety of loan products.
4. Fill in your loan application, or preliminary information in the case of an online loan
search, being completely honest and accurate in your answers. Remember that precise
information is important when you apply for a loan.
5. Review your loan offers and compare interest rates. Choose the loan with the best
repayment terms, paying special attention to the type of loan. A fixed interest rate is
generally best, because you'll know what your monthly payments will be and not risk an
increase.
6. Verify that all of the information on the loan papers, from your personal data to the
loan amount and terms, are correct. Sign and accept the loan. You'll usually receive a
check if it's a personal loan, or the financed vehicle or other item if it's a loan with
collateral
1. Download your credit report and learn your credit score. Check for inaccuracies in
your report, which you'll need to have fixed. Knowing your credit score will give you an
idea of the rates for which you'll qualify. In fact, some lenders even post what rates
each credit score range will likely receive.
2. Gather your personal information, including contact information, Social Security
number , monthly and yearly income totals, proof of income, previous two years' tax
returns and list of assets.
3. Find the loan application or applications pertaining to your desired loan, whether
it's a home equity loan, personal loan, or small business loan. Your local bank as well
as online lenders have applications for a variety of loan products.
4. Fill in your loan application, or preliminary information in the case of an online loan
search, being completely honest and accurate in your answers. Remember that precise
information is important when you apply for a loan.
5. Review your loan offers and compare interest rates. Choose the loan with the best
repayment terms, paying special attention to the type of loan. A fixed interest rate is
generally best, because you'll know what your monthly payments will be and not risk an
increase.
6. Verify that all of the information on the loan papers, from your personal data to the
loan amount and terms, are correct. Sign and accept the loan. You'll usually receive a
check if it's a personal loan, or the financed vehicle or other item if it's a loan with
collateral
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