GOBankingRates recently conducted a survey and asked people, “What are your 2016 resolutions?”
Of the top sixanswers, which included weight loss, better healthand living life to the fullest,over 30% of people wanted to save more and spend less, while nearly the same amount said theywanted to pay off debt.
Read more:10 tips to become debt free
So if you’re oneof thosepeople who want to save more money this year, check out these savings tips on howto set your planand avoid getting off track!
1. Have a goal.
The people who are the most successful at something have a strong ‘why’ behind what they are doing. So, why do you want to save money? Is it because you want to live comfortably in retirement? Or maybe you want to traveland see the world.Perhaps you want to prepare incase somethingunexpected happens in your life. Maybe you want to save for your children’s college education.Regardless of the end goal,what is your why? Write this down, then put it in a visible place to remind yourself daily!
2. Know where you stand.
It might be scary at first, but looking at where you are is key to where you’re going. Take a look at all of yourbank statements, credit card statements, debts and savings you have —and then take a step back to see the big picture. Pay special attention toanythingthatstands out to youand take note ofwhat things you might be spending money on that don’t align with your values. Is there anything that needs changing? Where do you want your money to go?
If there is anything that you don’t want to spend money on, cut it! And if you want to stick to that decision, figure out how much you were previously spending on that unnecessary expense,and then set up yourpaycheck’s direct deposit feature to send that amount directly to a savings account (just make sure you are still leaving enough money to cover necessary monthly bills etc.). Andthat way, the moneygoes into savings before you have a chance to spend it.
In addition, if you don’t yet have a budget, now would be a good time to create one. The best way to do this is to create categoriesbased onprevious months’ expenses, then tweak a bit if you had any expenses in your statements that didn’t align with your values.
Here are some tools and apps to help you create a budget that works for you.
3. Create a plan.
Based on your overall goals, knowing where you are and how much you can devote to saving, create a plan around it.
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Many financial experts say to ‘pay yourself first,’ meaning every time you get paid, save a percentage of your income before you do anything else.It is recommended to save at least a dime of every dollar you make, but if you can’t do a dime, start with penny and work up from there. If you feel that you’re behind on saving, you may decideto save $.15 or $.20 out of ever dollar you make. Whatever the amount, start with something — and you’ll likely figure out pretty quickly that you won’t even miss that money anyway.
Work backwards
Sometimes a good way to devise a plan is to work backwards from your end goal.
Let’s sayyou want to build up a $1,000 emergency fund — money you can tap into in case an unexpected expense comes up (like a car repair or medical bill).
If you make $2,500 a month in take-home pay (about $50,000 annual salary) and save 10% each month, you’d be able to put away $250 each month. So in order to reach that $1,000 emergency fund goal, it would take you about four months.
But —and this is a key step —youwant to make sure your goals are realistic — otherwise it will be easy for you to get discouraged and give up. This is why taking a look at your past spending habits is a good first step. From there, you can create a plan butalso be realistic about what will really work for your budget. Anything you can give up in terms of unnecessary expenses is found money!
Read more: 16 ways to save more money this year
Use automatedsavings
Automated savings — or lack thereof — could end up being what makes or breaks your plan.
Think about all the taxes you pay to the government in the form of automated payments fromyour paycheck. You know why you’re never late paying them? They do you the service of automatically taking the payments out for youbefore you ever see the money.And while no one likes the idea of the government’s hands in their pockets, the concept makes for a good analogy.
You can do the same thing for savings — except these payments will be to yourself. If you have direct deposit with your employer, you can often request that your company take a percentage or a dollar amount and put it into a separate account — like a savings account.You can even set up different accounts for different purposes, such as emergency savings, vacation, retirementand so on.
Budgeting your paycheck and putting money asidefor specific purposes is a great way to stick to a monthly plan — and ultimately, reach your goals. You can do this by separating cash into different envelopes — or by having specific amounts of your paycheck sent directly to separate accounts.
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You could also use an app likeDigitthat will automatically save for you every time you make a purchase.
Read more:Types of savings accounts: 12 options to save money
4.Monitor your spending.
Online banking and all types of apps make it super easy to monitor your spending.
If you want to use an app, Mint.comandPersonal Capitalare great tools thatcan help you monitor and track your spending.
It’s alsoa good idea to spend a little time each week managingyour money – planning for anything new that may be coming up or new ways you can reduce expenses.The groundbreaking book The Millionaire Next Doorrevealed thestrong correlation between time spent planning and considering personal finance and the accumulation ofwealth.
Read more: 7 easy ways to cut your monthly bills
5.Refine your spending habits.
Credit cards can run wild if not kept in check. One recent found thatpeople spend 12% to 18% more at fast-food restaurants when they use plasticinstead of cash. So whether you’re paying with cash or plastic, figure out what items you’re spending money on that don’t fit your values, then make adjustments anddump the rest into a savings account! You might also want to use the old-fashionedenvelope method to reinvent your spending habits.
It can bedifficult to change our choicesonce they become ingrained as habits, but realizing that you might have a habit that needs changing is half the battle. You can change your habits if your ‘why’ is strong enough — but don’t beat yourself up if you don’t get your spending habits the way you want them the first timearound.
6. Bounce back quickly & learn from mistakes.
If you mess up, don’t worry too much about it! Just resolve to get back on the horse as quickly as possible. All isn’t lost if you happen to make one bad move — just fix it as quickly as you can, and make it a priorityto get back on track.
Learning second hand from other people’s financial mistakes is definitely a preferred option when it comes to anything in life. But if you happen to make some financialmistakes yourself, just take it in stride and commit to doingbetter —now that you know better —for the future.
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Read more: 11 ways to make an extra $1,000 (or more)
7.Leave room for fun & rewards.
Fun doesn’t have to be expensive, but havingjust a little bit of it built into your budget can definitely help you enjoy the journey!
For example, if you hit a savings goal, reward yourself with something fun that you want to do that fits within your budget. If you have weekly or monthly goals that lead up to a larger savings goal, reward yourself with something budget-friendly when you hit that weekly or monthly goal. This could be anything from going to the movies to budget-friendly dinner out to buying yourself something small to reward and remind yourself of themilestone you’ve hit.
As long you don’t go crazy, you can have your cake and eat it to by havingfun built into your savings plan.
Read more:9 ways to find free money
