Hey you! Yeah, you over there! Do you feel like you are always trying to play “catch-up” with your finances? Are you tired of never having enough funds lying around to pay for emergencies? Do you want to learn how to save but don’t know how? You’re in luck! Saving money isn’t rocket science. All it takes is to shift your focus a little bit, and you can start saving today.
News flash: Saving money really isn’t that difficult. However, it does take a little bit of time and patience. This tends to scare some people off, while others use it to procrastinate saving until another day. If you’ve never been a saver, it can be somewhat of a daunting task. It is easy to feel as though your actions aren’t getting you any further ahead. However, the trick is not to jump in full force. Just like starting a diet, beginning an exercise program, or any other major life change, it is easy to get discouraged if you try to do too much at once. Instead, try to ease yourself into your new way of life using these simple tips.
Saving Money Tip #1: Eliminate Your “Latte Factor”
It is easy to discover large expenses that may be eating up much of your income. It is hard to miss that $1,700 rent or mortgage payment that you have to make each month. However, you may not even notice some smaller expenses that could be doing just as much damage to your savings goals. In his book The Automatic Millionaire, David Bach describes these sorts of expenses as a “latte factor.” Do you buy a cup of coffee at Starbucks each morning? Are you guilty of eating out for lunch every day? Maybe you enjoy a couple of pastries from Dunkin’ Donuts for breakfast each morning. These things all fall into the category of a latte factor.
A latte factor is a product that you spend a small amount of unnecessary money on several times a week or month. Unfortunately, these latte factors could be costing you hundreds, or even thousands of dollars a year. For instance, take the idea of a buying a premium cup of coffee from a place like Starbucks. One of these cups of “premium” coffee costs about $5. If you spend $5 on coffee 5 days a week, you are spending approximately $100 a month on Starbucks coffee. That translates to about $1,200 a year for your daily cup of Starbucks coffee. To put it in perspective, you could buy your own coffee and spend about $3 a month by making it at home. That is a savings of $1,164 a year.
As you can see, that latte factor may be slowly but surely draining your bank account. So, what is your latte factor? Do you have more than one? What is something small that you can cut out of your daily routine that may save you hundreds of dollars each year? Finding your latte factor and eliminating it is one of the quickest ways to start saving money today.
Saving Money Tip #2: Automatically Deduct Retirement Savings From Your Paycheck
Deducting savings, particularly retirement savings, from your paycheck is one of the easiest ways to save money. It also happens to be another of the ways to save that David Bach recommends in The Automatic Millionaire. What makes saving via payroll deduction so easy is that you never even realize the money was there in the first place. While you may think you have the discipline to put money away for retirement every month, the truth is that most people are kidding themselves. Once the money is in your hand, it is simply too easy to find other things to spend it on.
The best part about these company sponsored plans is that many companies offer some sort of company match should you choose to participate. In other words, your boss will match your savings by giving you more money. That is straight cash homey, and it is FREE! HOLLA! Do your future self a favor and start contributing to a work sponsored 401k or IRA today!
Saving Money Tip #3: Try Online Banking
When I was younger, I sucked at balancing my checkbook. I tended to forget to write down my ATM transactions, which caused me to lose a truckload of money in overdraft fees. That’s not good, especially when you are living paycheck to paycheck. How did a moron like me fix this situation? Well, I finally wised up and married my wife – and she watches our money like a hawk! If you are not lucky enough to be married to somebody like Holly, you might want to try to use online banking.
Online banking is great because it gives you an “up to the minute” picture of what your account balance looks like. It makes it very easy to track your money because it gives you instant feedback. Furthermore, you can save money by not having to write checks for every bill you pay. While the initial setup takes a bit of time, you will save yourself hours of check writing once it is done. If you haven’t already moved to online banking, you should definitely check it out.
Although it may not be considered traditional online banking, there are several rad apps out there that you can use to track your savings and spending as well. The most popular app is called Mint.com. In order to get started, simply create an account through Mint.com. You’ll be asked to connect your bank accounts to the program. From there, you are ready to save! Mint.com provides all kinds of neat charts and graphs that will help you to track your income, spending, and savings. It is a pretty groovy way to keep track of your money! Plus, while your friends might think you’re a tool for budgeting, they might cut you some slack for doing it in a high-tech way. Bonus!
Saving Money Tip #4: Make a Budget
If you really want to get a hold of your finances and start saving money immediately, the best thing that you can do is to make a budget. Using a budget gives your money a purpose. Dave Ramsey likes to say that a budget makes your money behave. By creating a budget, you are consciously telling your money what it should be doing that month.
Making a budget can seem difficult, but it really doesn’t have to be elaborate. All it takes is a piece of paper and a pencil. Don’t have paper or pencil? Label some different envelopes using different expense categories and then stuff them with cash each month. Is using envelopes against your religion? Try using a zero-sum budget - which happens to be our favorite style and the type we think is most effective. There are several different types of budgets that you could use. Just pick one that you like, and make your money go to work. You’ll be amazed at how much extra money you’ll “find” each month!
While saving money may not come natural to you, anybody can learn to do it. Simply, adopt a mindset that saving is important to you, and stick with it. So, what are you waiting for? There is no better time to start saving money than TODAY!