To begin with in an effort to put a stop to the bleeding, you’ve got to determine the cause. First of all, track all of your spending. Once you understand where you’re wasting money, make an effort to stop wasting your money and start saving your money instead. For instance, take the money you were wasting on lattes, dining out, whatever and save it. You may think that you need to definitely find a more affordable place to live, when in reality, all you need to do is stop dining out as often, saving you tons of money.
You can manually keep track of your spending, by recording each and every expenditure, or perhaps make use of free software such as mint.com or quickenonline.com. After aproximately a month, you’ll see all the things you’re spending money on and you can begin to start saving your money instead. With regards to credit cards, you simply need to make the decision to never carry a balance, and don’t.
The manner in which you spend your money should always be in this order: Needs, Savings, Wants
First priority is Needs: housing, food, heat, etc.
Second priority is Savings: emergency savings, retirement savings, down payment savings, etc.
Third priority is Wants: cool clothes, manicures, eating out, services you can do yourself, etc.
If your ‘Needs’ take up more than 50% of your earnings, then you’ve got to scale back on your ‘Wants’ or perhaps discover a less expensive solution to meet the ‘Needs’. For example, bring your lunch to work, make your own instant coffee at home, etc.
Another excellent suggestion is to try to regard ‘saving’ money as though it were any other bill. Treating it like a bill doesn’t give you the “option” to save. It becomes automatic. Always spend less than you make, and it will be easy for saving your money.
It helps to put money in an account where you are not able to easily access the cash. For instance setting up a savings account at INGDirect.com and setting up an automatic deposit from your main checking account (ING calls it an Automatic Savings Plan). You can have it set up to take from your checking account one day after payday so you don’t have the money long enough to spend or miss it. In case of an emergency, and you need to get the money from ING, it takes just a few days. This is a sensible delay for something like a car repair, but way too long of a wait for shoe shopping.
Here are some other simple techniques for saving your money:
- Make a list of all your debts, plus the interest rates, balances and min payments for each
- Find a way to lower your interest rates. Call the creditors and ask for a lower rate, transfer balance to a lower rate card
- If you feel you can be responsible with credit cards, take advantage of reward cards.
- Shop around for your car insurance.
- Reduce your phone and cable packages. Disconnect what you can.
- Do your own yard work and fire the landscaper.
- Let your wife or girlfriend cut your hair at home. Men’s hair is generally easier to cut.
- Make sure you take advantage of any flexible spending account your employer offers to pay for. Example: eyeglasses, prescriptions, OTC meds and other medical expenses.
- Keep your home a few degrees warmer in the summer and cooler in the winter. Turn down the temp on the water heater. Wrap the water heater in an insulative blanket made for it.
- CFL bulbs are getting cheaper, look into using those when current bulbs die.
- If you own a home, you might want to refinance. You may think you already have a decent rate on your mortgage, but you could do much better and save substantially.
- Make sure you’re getting any tax deductions you can using the homestead exemption as an example. Same goes for federal tax deductions, don’t overlook anything.
- Do as much of your own car maintenance as you’re comfortable with.
- Stop eating out as much. When you do, find places that are running specials that day, particularly “kids eat free” if you have kids.
- Use coupons and learn to shop smarter. Buy store brands. Buy things you use frequently (and that won’t perish) in bulk when they’re on sale.
- Drop the gym membership and pickup something else, like running, biking (if you have a bicycle), etc.
- Go through your junk at home and consider selling anything that you just don’t use.
You can find out how I am easily saving extra money per month in my article “How I’m Saving $200 per Month”. If I can do it, anybody can!