I thought I’d share some of my personal savings tips with you. The idea for this blog came when I cut $11 from my monthly internet bill. That might not seem like much, but I’m pretty excited to have an extra $132 a year. As we’ve seen in past posts, small savings amounts over time can have a meaningful impact on long-term goals. In this post I’ll share savings tips and concepts that motivate me personally.
Cut Expenses, Not Lifestyle
When you’re looking at expenses, first consider things that will reduce spending that will not affect your lifestyle. This could be researching a new low-cost phone plan for the family. Or in my case, I cut $11 from my internet bill and have the same high-speed internet. Sure it has a little less download capacity, but I wasn’t using that anyway. Another example of this is to pay for insurance premiums annually instead of monthly. This will save you approximately one month’s premium per year.
Top Savings Strategy
The partial envelope method is one of the most effective savings strategies I’ve observed. I find this strategy works particularly well with discretionary expenses, such as dining out or entertainment. Here is how it works; you decide on an amount you’d like to spend in a certain category, such as dining out, each month. You withdraw a weekly amount in cash (1/4 of the monthly amount) and this cash is only used in this category. When you run out, there is no more spending in this category for the week. If you have extra you can carry it forward to the next week. This is a very tangible way to create awareness of spending. By limiting expensive spending categories savings is created!
Savings vs. Earnings
In the example of $132 per year in savings on my internet, I’d have to earn much more than that amount to put the same dollar amount in my pocket. I might have to earn around $167 to keep $132 because of taxes. This assumes a 27% tax burden. This concept has always motivated me to save. Earning more can be an effective way to save more. However, I think of cutting costs as a simple and immediate form of savings.
Once you’ve carved out savings make it automatic. Make that $11, or whatever amount you’ve carved out, transfer automatically into a savings or retirement account each month. Or it could be $5.50 per paycheck. Whatever you do, don’t leave that extra savings in your checking account. Human nature tells us it is there to spend if we see a high balance in our checking. Create savings and make it automatic so you can SaveUp!
This post was written by SaveUp’s personal finance contributing writer, Catherine Hawley, CFP®.
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