Step by Step Guide to Saving Money
While most people know that it is important to start saving money for the future, it is not always so simple to start saving. Excuses are easy to make, and there will always be purchases that seem more important than saving. In addition to just spending less money it is also important to calculate how much money you need to live on, and what your savings goal is. This guide should help you set up your own, realistic savings goal.
Step 1: Calculate your Current Debt
While having a debt will not make it easier to save money, it is not necessary to be completely out of debt. However, it is important to calculate your current debt, and figure out how much longer it will take to pay off the debts. While it is usually best to pay off debts early, if you can get in a savings program that will match your investments, in the long run it may be worth it to invest more, and take a little longer to pay off debt. If possible opt for debt consolidation, so you will have less interest to pay off.
Step 2: Calculate Living Expenses
In addition to calculating the amount of debt left to pay off it is important to figure out how much you will need to live on each month. This is the amount of money you spend on food, rent, bills, entertainment, and miscellaneous. By budgeting your monthly expenses, you can figure out how much you will be saving on a monthly budget.
Step 3: Set Money Saving goals and a time frame
Once you know your monthly budget it is time to decide how much you would like to save. This can be the amount it will take to buy a new house, buy a dress, retire, or anything else you choose. The important thing is that it is something that you desire, so you will remain motivated to continue saving money. You should also set up a reasonable time frame for your savings plan. The amount you planning on saving will make a difference in your time frame, because while six weeks is a reasonable time frame for a video game, three years would make more sense if you are saving for a house. An attainable savings goal will help you avoid becoming demotivated.
Step 4: Decide how much to Set Aside
Once you have set your savings goals it is time to figure out how much you have to set aside every week, month and paycheck to meet those goals. Using your savings goal, and the time frame you have decided on you should be able to figure out how much you will have to subtract from each paycheck each month to meet that goal.
Step 5: Add the Savings into your Monthly Budget, Find ways to trim the Budget, and adjust the Plan
Always insure that your plan to save money fits within your budget. Consult your budget from Step 2 and add the amount you wish to save every month to that budget. It is important to make sure that you actually earn the final total every month, because leaving yourself short will be discouraging. Finding ways to cut out extra expenses and trim the budget will add to the amount you have available to save. And if you just cannot meet your saving goal without blowing the budget, it is better to adjust the savings plan now, than to be discouraged later on.
Step 6: Open a Savings Account
Set up a separate interest bearing savings account for savings. Having this money set aside from the rest of your money will make it easier to continue saving money. You should also check to see if your employer has a program where they will match the amount you contribute to a retirement account.
Step 7: Stay Motivated
The most important step for any money saving plan is to always stay positive and remain motivated. Just keep thinking of the end goal.