Now with some idea of what your financial goals are, it’s time to find ways to start saving toward those goals. Non-essential spending, such as on entertainment, is an obvious place to start, but look closer at all of your spending choices and you may find there are many places in your budget to save money.
Small Expenses Can Add Up Small, everyday purchases can add up to a substantial sum over the course of a month. While it’s important to limit even small purchases, a budget in which you expect yourself to give up every small luxury may be doomed to failure. Nonetheless, you will probably need to make some sacrifices in order to achieve your savings goals, so try to strike a balance that works for you. For instance, instead of enjoying a more expensive coffee drink every morning, you might consider substituting regular coffee most mornings. Instead of eating out every day, you might eat out only occasionally.
Avoid Unnecessary Impulse Purchases You can’t always account for unplanned expenses that will arise from time to time, but unless you can control unnecessary and impulsive spending, your budgeting efforts are likely to fail. One good strategy is to not go shopping without a clear idea of what you need to buy. Otherwise, it’s easy to walk away with something you didn’t intend to buy and probably don’t need. If possible, research the cost of the item in advance and take only that much money with you to the store. If you find yourself wanting to make a purchase you hadn’t planned on, ask yourself if you really need the item at this time. Also, it’s a good idea to sleep on it before making a purchase. The next day, you may find you really didn’t need that item after all. Another strategy is to leave credit and debit cards at home and only pay cash. By giving yourself a set amount to spend on non-essentials during a budgeting period and paying cash for everything, you’re likely to be more conscious of your spending. Finally, be a smart shopper. Compare prices, use coupons, and if you can, wait until an item goes on sale before buying it.
Beware of Luxuries Masquerading as Necessities We may think of spending in categories such as food, transportation, utilities, and housing as necessary, but you may be able to save plenty by examining your choices in those areas. As touched on above in the category of food, the most obvious savings can be had by eating at home, rather than at restaurants, but you may be able to further lower your food bill simply by grocery shopping with a list, so that you don’t make purchases on impulse. If you own a car, you can save on gas by consolidating errands or taking public transportation and using your car only when needed. If you plan to buy a car, you may want to keep fuel efficiency in mind and consider a used car instead of a new one. With utilities, you might save money by opting for a less expensive cell phone plan, dropping premium channels from your pay TV package, or turning down the heat and A/C in your home. In regard to housing, once you have a better idea of your financial goals and budgeting targets, you can make a more informed decision as to whether your current choice of housing is consistent with your financial goals. For more ideas, see Tips for Saving.
Avoid Emergency Borrowing Sometimes an emergency can force individuals who are otherwise financially secure into debt. The best way to avoid the budget-busting, high-interest debt that can be brought on by an emergency is to have additional savings available. While more is better, as little as $500 in a savings account can help cover many situations that might otherwise cause you to resort to high-interest credit cards, title loans or, even worse, payday lenders.
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