How to Save Money (with Pictures)

2024 Author: Samantha Chapman | [email protected]. Last modified: 2024-01-17 17:31

Saving money is much easier said than done; everyone knows this is a wise choice in the long run, but many of us still have a hard time doing it. To save money, it is not enough to spend less - and this trick is not easy to put into practice. Smart savers also consider how to spend the money they have and how to maximize their income. Start with Step 1 to learn how to set realistic goals, keep your spending under control, and get the most benefit from your money in the long run.

Steps

Part 1 of 3: Saving Money Responsibly

Step 1. First, pay yourself

The easiest way to save money is to make sure you never get a chance to spend it. Having a portion of your salary deposited directly into a savings account or pension fund allows you not to worry about how much money you should set aside each month; in practice, you save automatically and you can spend all the money you have left as you like. Over time, putting even a small portion of each salary into your savings can make a difference (especially when considering interest), so get started early to get the most benefit.

• To establish an automatic deposit, talk to the payroll person at your job (or, if your company uses them, the payroll service). If you will provide the information of a deposit account other than the checking account where you receive the salary, you should be able to establish a direct deposit without any problems.
• If for some reason you cannot get an automatic deposit for each month (for example because you work as a freelancer or because you are paid in cash), you decide how much money to manually deposit into a savings account each month and always follow your guidelines.

Step 2. Avoid getting into debt

In some cases, getting into debt is essential. For example, only very rich people have enough money to pay for a house in a lump sum, but millions of people manage to buy real estate only thanks to mortgages to be repaid over time. In general, though, if you can avoid getting into debt, do it. In the long run, paying the money owed at the time of purchase is always a more advantageous solution than repaying a loan that accumulates interest over time.

• If you can't help but take out a loan, try to pay the highest possible down payment. The greater the part of the purchase that you can deal with immediately, the sooner you pay off the debt and the lower the interest.
• Even though everyone's financial situation is different, most banks recommend that debt expenses amount to about 10% of gross income and consider 20% to be solid. 36% is considered to be the upper limit of the reasonable amount of debt.

Step 3. Set yourself reasonable savings goals

It's much easier to save money if you have a goal to aim for. Set goals within your reach to motivate you to make the difficult financial decisions needed to save responsibly. It can take years or decades to achieve the most important results, such as buying a house or retiring. In these cases, it is important to check your progress regularly. Only by taking a step back and observing the situation from afar can you understand how far you have come - and how much more you have to go.

More ambitious goals, such as retirement, can only be achieved after a long time. In the required period, the financial markets will change several times. You may want to research the future market trend before setting yourself a goal. For example, if you're in the prime of your career, many finance experts argue that you should save around 60-85% of your annual income to maintain your lifestyle for each retirement year

Step 4. Establish a time window for your goals

Setting ambitious (but reasonable) time limits to reach your goals can be a great motivational boost. For example, imagine you want to own a house within two years of now. In this case, you will need to research the average price of houses in the area where you would like to live and start saving for the down payment on your new home (as a general rule, the down payments must represent 20% of the total cost of the home).

• In our example, if the houses in the area you have chosen cost around € 300,000, you will need to be able to save around € 60,000 over two years. Depending on your income, this may not be a realistic prospect.
• Setting time limits is especially important for short-term goals. For example, if you have to repair your car, but you can't afford the cost of the mechanic's work, you should save the money you need as soon as possible, so as not to run the risk of being without a means of transport to get to the workplace. An ambitious but reasonable time limit can help you achieve this goal.

Step 5. Keep a personal budget

It's easy to commit to ambitious savings goals, but if you don't have a way to keep track of your spending, it will be very difficult to succeed. To keep track of your financial progress, try to budget based on your salary at the beginning of each month. Allocating a portion of your income to all your major expenses ahead of time can help you avoid wasting money, especially if you split each paycheck right away as soon as you receive it.

• For example, on an income of 3000 € per month, the budget can be as follows:

  • Household bills and expenses: € 1000

    Debts with banks: € 300

    Food: 500 €

    Internet: 70 €

    Petrol 150 €

    Savings: 500 €

    Miscellaneous: € 200

    Luxury goods: 280 €

  

  Step 6. Make a note of the expenses

  Staying on a budget is essential for anyone looking to save, but if you don't keep track of your expenses, it will be much more difficult to achieve your goals. Keeping track of what your monthly outgoings are can help you identify areas where you need to learn to contain yourself to stay within your budget. To do this, you need great attention to detail. While we should all take note of the most important expenses, such as rent and mortgage payments, the attention you should pay to smaller purchases depends on the severity of your financial situation.

  • It may be helpful to always carry a small notebook with you. Get in the habit of recording all expenses and keeping receipts (especially for more expensive purchases). When you have the chance, write the amounts down in a larger notebook or computer software, to record them over the long term.
  • Note that there are many applications available for your phone today that can help you keep track of your expenses (some of them are free).
  • If you spend too much, don't be afraid to keep all your receipts. At the end of the month, divide them into categories, then count the total expenses. You may be amazed at how much money you waste on unnecessary purchases.

  

  Step 7. Check the amount of all payments several times

  Always ask for a receipt when making a purchase in person and always print a copy of online purchases. Make sure you always pay the right price and don't get charged for things you don't want - you'd be surprised how often this happens.

  • For example: you are at the bar with friends and one of them orders a margarita for the whole group; make sure that payment doesn't go to your credit card. It is precisely these situations that, accumulating, can potentially make you find yourself on the pavement.
  • Don't split your expenses just because it's convenient. If your meal costs a third of that of the friend you had lunch with at the restaurant, you shouldn't pay half.
  • Consider downloading an app for your smartphone to help you calculate tips more accurately.

  

  Step 8. Start saving as soon as possible

  Money stored in savings accounts accrue interest at fixed percentages. The longer your money stays in the account, the more interest you will earn. This is why it is advantageous to start saving as soon as possible. Even if you can only contribute a small amount to your savings each month when you are under 30, do it anyway: small amounts of money, if left in high-interest accounts for long periods, can see their value doubled.

  For example, let's imagine that you managed to save € 10,000 before the age of thirty, thanks to your low-income job and that you decide to deposit that amount in a high-interest account (4% per annum). In five years, you will earn around € 2,166.53. However, if you had saved that amount a year earlier, you would have earned about € 500 more at the end of the same period, without any extra effort; a small but not insignificant bonus

  

  Step 9. Consider contributing to a retirement fund

  When you feel young, energized and healthy, retirement can feel so far away that it doesn't deserve your attention. However, when you get older and start to lose heart, you probably won't think about anything else. If you are not lucky enough to inherit a large sum of money, you should start saving for retirement as soon as you have started a stable career. As mentioned earlier, even if everyone's situation is different, it's wise to set aside 60-85% of your annual income to maintain your current lifestyle for each retirement year.

  • If you haven't already, talk to your employer about your social security contributions and the possibility of setting up severance pay or other pension funds. These solutions allow you to automatically deposit part of your salary into an account that will allow you to receive a pension when you have accrued sufficient contributions.
  • In 2015, the minimum requirements for receiving the retirement pension are 35 years of contributions and 62 years of age.

  

  Step 10. Invest with caution in the stock market

  If you've been saving responsibly and have good capital at your disposal, investing in the stock market is a profitable (albeit risky) opportunity to make more money. Before buying stocks, it is important to understand that all money invested in the stock market can be completely lost, especially if you don't know what you are doing, so don't use this method as a long-term savings. Instead, consider the stock market as an opportunity to make high percentage bets with money you can afford to lose. In general, people don't need to invest in the stock market to save enough for retirement.

  For more information on how to make wise investments in the stock market, check out wikiHow and other websites

  

  Step 11. Don't be discouraged

  When you can't save, it's easy to lose your mind. You may think you have no hope; you will believe that it is impossible to find the money you need to achieve your long-term goals. Remember, however, that no matter how small your starting capital is, you can always start saving. The sooner you start, the sooner you will achieve financial stability.

  If you are worried about your financial situation, ask for help from an advisory service. These agencies, which often operate for free or for very low fees, can help you start saving

  Part 2 of 3: Cut Down on Expenses

  

  Step 1. Eliminate luxury items from your budget

  If you are having trouble saving money, this entry is the best place to start. Many of the expenses we take for granted are not essential at all. Eliminating the expense of luxury goods is a great first step to improving your financial situation, because it does not significantly alter the quality of your life or the ability to do your job. While it can be hard to imagine your days without a high-fueling car and satellite television subscription, you may be surprised at how easy it is to get on without those things when they are no longer a part of your life. Here are some simple ways to cut down on spending on luxury goods:

  • Cancel your subscriptions to unnecessary internet services and satellite television.
  • Switch to a cheaper rate plan for your mobile.
  • Change your expensive machine for one that consumes little and does not require large maintenance costs.
  • Sell any electronic devices you don't use.
  • Shop for clothing and home furnishings at the flea markets.

  

  Step 2. Find a less expensive home

  For almost all people, housing costs represent the largest expense item in the budget. Therefore, saving in this area can allow you to dispose of a large part of your salary for other important items, such as retirement. While it is not always easy to move house, you should do a careful analysis of your expenses if you are unable to meet the budget you have imposed on yourself.

  • If you live in rent, try renegotiating with your landlord to snag a lower price. Many landlords want to avoid the risk of having to look for other tenants, so you may be able to get a better deal if you have a good relationship with your landlord. If necessary, you can offer hours of work (such as maintenance or gardening) to lower the rent.
  • If you need to pay a mortgage, talk to the bank about getting a refinance. You may be able to snatch a more favorable deal if your credit is stable. When you decide to refinance a loan, try not to extend the duration of the installments too much.
  • You may want to consider moving to areas where housing is cheaper.

  

  Step 3. Eat on a budget

  Many people spend more than they need to on food. While it's easy to forget budget constraints when biting into steak at your favorite restaurant, food-related expenses can go up a lot if you don't keep them in check. In general, buying in bulk is more profitable in the long run than buying small quantities of food; if you spend a lot of money on meals, you can decide to buy from wholesalers who supply restaurants. The most expensive option of all is to eat in restaurants, so try to eat at home as often as possible to save money.

  • Choose inexpensive and nutritious foods. Instead of buying ready-made and processed foods, try checking your supermarket's fresh food department. You might be surprised how cheap it is to eat healthy! For example, you can buy brown rice, a nutritious and very filling food, for less than one euro per kilo.
  • Take advantage of discounts. Many supermarkets (especially large chains) distribute coupons and discounts at the checkout. Don't waste them!
  • If you often eat at a restaurant, stop doing it. Preparing a meal at home almost always costs a lot less than ordering it at a restaurant. Furthermore, by cooking your own dishes, you will also learn a useful skill that will allow you to entertain friends, satisfy relatives and even attract potential romantic companions.
  • If your situation is really bad, don't be ashamed to take advantage of the opportunity to eat for free. The soup kitchens offer meals to people in need. If you need help, consult your local authorities for more information.

  

  Step 4. Consume less energy

  Most people accept the price of the bill without worrying. In reality, however, it is possible to greatly reduce energy consumption with a few simple steps. These tips are so mundane that there's no reason not to follow them if you want to save money. As an added benefit, consuming less energy reduces the amount of pollution you indirectly produce, minimizing your impact on the environment.

  • Turn off the lights you don't need. There is no reason to keep the light on in a room where no one is around (or if you are not at home), so always remember to turn it off when you move. Try leaving a note on the door if you have trouble remembering it.
  • Avoid using heating and air conditioning if they are not needed. If you are hot, open the windows or use a small fan. If you're cold, wear layered clothing, use a blanket, or turn on an electric heater.
  • Invest in good insulation. If you can afford substantial home improvements, replacing old insulation with highly efficient modern products can save you money in the long run by preventing hot or cool air inside the house from escaping.
  • If you can, invest in solar panels. This solution is an excellent investment for your future and that of the planet. Even though the installation cost is quite high, photovoltaic technology becomes cheaper with each passing year.

  

  Step 5. Use less expensive means of transportation

  Owning, maintaining and fueling a car can take up a large part of your income. Depending on the amount of kilometers you drive, the price of fuel can be as high as several hundred euros per month. In addition, the car requires fees for taxes and maintenance. Instead of driving, use cheap (or free) alternatives. This allows you not only to save money, but also to exercise more and reduce the stress of the journey to work.

  • Consider public transport in your area. Depending on where you live, you may have cheap transportation available. In almost all cities there are subways, buses or trams that connect the various areas and to move from city to city you can take advantage of the bus or the train.
  • Consider walking or cycling to your work. If you live close enough to your workplace, these are excellent choices for free commuting, fresh air and exercise.
  • If you can't help but take the car, consider sharing your travel and expenses with colleagues. By doing so, each of the passengers will contribute to the cost of fuel and maintenance of the vehicle. Plus, you'll have someone to talk to on the way.

  

  Step 6. Have fun without breaking the bank (or for free)

  While you can cut the luxuries out of your life to cut down on personal expenses, you don't necessarily have to stop having fun if you're trying to save. Finding cheaper entertainment allows you to strike the perfect balance between fun and responsibility. You will be surprised how much fun you can have with just a few euros, thanks to creativity!

  • Stay up to date on events in your community. Today, almost all cities publish calendars of events scheduled in the area on the internet. Often these events will be inexpensive or even free. For example, in a medium-sized city it is often possible to visit free art exhibits, attend outdoor screenings, and attend donation-based community events.
  • Read. When compared to movies and video games, books are inexpensive (especially when bought used). The best books are exciting and allow you to experience strong emotions through the eyes of a character or to learn new things.
  • Enjoy inexpensive activities with friends. There are endless possibilities for fun with friends that do not require large expenses. For example, go for a hike, play a board game, watch an old movie broadcast for free in the cinema, explore parts of the city you don't know or play sports.

  

  Step 7. Avoid expensive addictions

  Some bad habits can ruin your savings efforts. In worst-case scenarios, these habits can become severe addictions, almost impossible to defeat without help, and can even cause harm to your health. Protect your wallet (and your body) from these addictions by avoiding them right away.

  • Not smoking. Today, the dangerous effects of smoking are well known. Smoking causes lung cancer, heart disease, heart attacks and other serious conditions. If that's not enough, cigarettes cost a lot - up to more than € 5 per pack.
  • Do not drink too much. While a drink with friends may not hurt you, drinking a lot on a regular basis can cause serious problems in the long run, such as liver damage, brain damage, weight gain, delirium, and even death. If that weren't enough, sustaining an addiction to alcohol is a major burden on your finances.
  • Do not take addictive drugs. Drugs such as heroin, cocaine and methamphetamine are extremely addictive and can have very serious (even lethal) health effects. They also often cost much more than alcohol and tobacco. As an example, country musician Waylon Jennings said he spent over $ 1,500 a day on his cocaine addiction.
  • If you need help overcoming an addiction do not hesitate to contact an emergency line.

  Part 3 of 3: Spend Your Money Intelligently

  

  Step 1. Start spending by starting with the essential items of your budget

  There are some things you can't do without: food, water, home, and clothing must be your top priorities. Of course, if you become homeless or go hungry, it would be impossible to meet the rest of your financial goals, so always make sure you have enough cash for these minimum requirements before you dedicate your money to anything else.

  • Just because food, water, and shelter are important doesn't mean you should spend everything you earn on those needs. For example, reducing the number of dinners at restaurants is a way to greatly reduce food spending. For the same reasons, moving to an area where rents or house prices are lower is a great way to save on your home.
  • Depending on the area you live in, housing expenses can make up a large chunk of your income. In general, almost all experts advise against moving into a home that requires more than a third of your income for expenses.

  

  Step 2. Save for an emergency fund

  If you don't already have an emergency fund with enough money to survive if you lose your job, start creating one now. Setting aside a reasonable amount of money in a secure account gives you the freedom to continue living decently, even if you find yourself unemployed. Once you have covered the essential expenses, you should dedicate part of the income to the creation of this fund, until you have an amount available that can cover 3-6 months of expenses.

  • Note that living expenses vary depending on the cost of living in the area you live in. Even if it is possible to survive with € 1500 for a few months in rural areas, with that amount you would not be able to pay even the rent for a month in Milan. If you live in an expensive area, your emergency fund needs to be larger.
  • In addition to giving you the peace of mind not to go broke even if you lose your job, an emergency fund can also allow you to earn something in the long run. If you decide to quit and don't have an emergency fund, you may be forced to take the first job you find, even if it isn't well paid. If, on the other hand, you could survive without working for some time, you could make the best decisions for your career.

  

  Step 3. Pay your debts

  If you don't keep them in check, they can completely ruin your savings efforts. If you paid off your debts at the minimum rate, you would end up spending a lot more money than if you paid back the sum that was loaned to you in less time. Save money in the long run by dedicating a good chunk of your income to paying off debts so you can pay them off as quickly as possible. As a general rule, paying high-interest mortgages first is the most effective way to use your money.

  • When you've covered essential expenses and set up an emergency fund, you can safely devote almost all of the rest of your income to paying off your debts. If you don't have an emergency fund, you might decide to split the extra income between debt and the fund.
  • If you are indebted to multiple institutions and are unable to pay all the installments, you can consider consolidating your debt. You could sort all of your debts into one loan with a lower interest rate. It is important to note, however, that the payments for consolidated debts are almost always longer than the initial ones.
  • You can try to negotiate directly with the institution that granted you the loan to reduce the interest rate. The creditor does not benefit from bankrupting you, because he would lose his entire investment, so he could give you a lower interest rate to allow you to pay off your debt.
  • For more information, read this article.

  

  Step 4. Save some money

  If you've created an emergency fund and paid off your debts, you probably want to start keeping the rest of your earnings in a bank account. The money you save this way is different from your emergency fund - you can use it for big, big purchases, like car repair expenses. In general, though, you should avoid using your savings in order to make them grow. If you can, try to dedicate at least 10-15% of your monthly income to savings already when you are under 30; many experts agree that this is a wise choice for you.

  • When you get your paycheck, you may be tempted to make impulse purchases. To avoid this possibility, deposit your savings into a bank account as soon as you get paid. For example, if you try to save 10% of what you earn and receive a € 700 check, immediately pay € 70 into your account. This habit can help you avoid unnecessary expenses and accumulate a large sum over the years.
  • An even better idea is to automate the deposit of savings, so that you never have any numbers that can tempt you. For example, talk to your employer to help you set up an automatic payment of part of your salary through the bank or a third-party service. This way, you won't have to do anything to set aside the percentage of your paycheck you want to save.

  

  Step 5. Spend money on non-essential goods the smart way

  After you've set aside a good percentage of your income as savings, if you still have money to spend, you can make non-essential investments to increase your productivity, earning potential, and quality of life over the long term. While these types of purchases are not as essential as water, food and household expenses, they are smart choices that can save you money over time.

  • For example, buying an ergonomic chair for your office is not essential, but it is a smart choice in the long run, because it allows you to work harder and minimize back pain (which can force you to face medical bills. in the future). Another example is replacing your old water heater. Even if the model you have is sufficient in the short term, by purchasing a new one you will not have to incur expenses for the maintenance of the previous one.
  • Other examples include purchases that allow you to work for less, such as monthly or annual passes to public transport, tools that allow you to work more efficiently, such as mobile headsets that allow you to answer the phone without using your hands and purchases that allow you to work better, such as gel insoles to insert into shoes to improve posture.

  

  Step 6. Leave luxury goods for last

  Saving does not mean leading an austere and joyless life. When you've paid off your debts, created an emergency fund, and spent your money on smart purchases that will benefit you in the long run, it's okay to dedicate some money to yourself. Healthy and responsible luxuries keep you from going crazy when you put your heart and soul into work, so don't be afraid to celebrate your financial stability with a few frivolous purchases.

  Luxuries include anything that is not an essential commodity and offers no long-term benefit. This broad category includes travel, restaurant dinners, a new car, a satellite TV subscription, expensive gadgets, and more

  Advice

  • If you receive unexpected sums of money, pour them all into your savings and keep putting aside the amounts you have set. You will reach your goals first.
  • Even if you really want something, ask yourself if you really need it. In most cases the answer is "no".
  • Most people can save something, regardless of their income. Starting to save small bucks allows you to follow good habits. Even setting aside € 5 a month will teach you that you don't need as much money as you thought.
  • Always estimate your expenses up and your income under.
  • Shop with banknotes and always put the rest aside. Use a piggy bank or jar to store your coins. The leftovers may seem like insignificant amounts, but over time they build up and can help you save money. Some banks today offer coin counting machines for free. When you go to exchange your coins, ask to be paid by check, so as not to be tempted to spend the money.
  • Take care of the things you own. This way, you will have to replace your items more rarely. Also, avoid doing this unless absolutely necessary. For example, just because the electric toothbrush motor has broken doesn't mean you can't use it as a simple toothbrush anymore.
  • Whenever you want to buy something, think about what you are saving for and how far that purchase may take you away from your goal.
  • If you regularly receive the same salary, it is easier to create a budget. If you have variable compensation, it is more difficult to keep your expenses under control, because you don't know when you will be paid again. List the budget items in order of importance and start spending from the first ones. Do not risk; you assume it takes a long time before you get any more money.
  • Use affirmations. For example, repeat this sentence to yourself: "Debts are not a viable option."
  • If you can't give up all your credit cards, at least freeze them - literally. Put them in a container full of water and keep them in the freezer. This way, if you want to use them, you will have time until the ice melts to reflect on your purchase.

  Warnings

  • If you make mistakes, don't get down on yourself. Just try to do better on your next paycheck.
  • Don't go window-shopping if you have money in your pocket: the temptation to spend your earnings would be very strong. Go shopping only with a specific shopping list.
  • After a long week of work, you may be craving some luxury, thinking "I deserve it". Remember that the things you buy are not gifts for yourself; they are exchanges, products for your money. You definitely deserve them, but can you afford them? If you can't, remember that you deserve to reach your savings goals!
  • If you are not really in a dire financial situation (you risk eviction and your three children are hungry), don't cut your health-related expenses. The costs of preventative medical care, such as doctor's visits or anti-worm pills for your dog, can be huge for you, but saving money in this area will bring you nothing but problems in the future.
  • If you have friends with holes in them, write a list of ready-made excuses to explain why you can't join them.