Training yourself to save money might seem impossible at first, but it’s an invaluable skill that will serve you well throughout your life. When you’re hit with unexpected costs or a drop in income, a rainy day fund can mean the difference between being prepared and going into debt.
But if you’re not used to saving money, how do you start?
As with any new habit, it can take time and practice, but once you get accustomed to monitoring your finances, it’s not that difficult to master.
Start an Emergency Fund
Your primary and most important objective should be emergency preparation—having a financial cushion in case something goes wrong. Many financial experts recommend saving enough money to cover all your necessary bills for a minimum of three months, which can be used in the event of a sudden loss of income.
Once you’ve shored up your emergency fund, start thinking of additional savings goals. Whether it’s for a new appliance, a down payment on a car or home, or college tuition, deciding what you’re saving for, can help you get started and set a realistic timeline.
But where do you find the money to start saving? The tips below can help.
5 Steps to Start Saving Money
These simple tips can help you kick-start your savings goals:
1. Avoid Cashing Checks and Open Bank Accounts
Cashing checks can get expensive, and that doesn’t help you to save money. If you don’t already have one, open a checking account with a financial institution—like a bank or credit union—so you can deposit your paychecks directly into a secure location.
When choosing a checking account, try to avoid pesky bank fees that will eat into your income. Minimum balance fees and overdraft fees are just a few examples of costs that you can avoid—and there are plenty of banks that won’t charge either.
Once you have a checking account, consider opening a separate savings account where you will stash the money for your savings goals. Having these funds in a different account can help avoid the urge to spend the money you’ve set aside for emergencies or long-term goals.
2. Understand Your Current Cash Flow
You can easily keep track of your cash flow by reviewing your receipts and bank statements at the end of the month.
Look closely at the monthly amount you spend and what you spend it on—it might surprise you! Any nonessential spending, such as costly entertainment or monthly subscriptions, can be cut back to free up more cash for saving.
Late fees are another expense that can be avoided by understanding your cash flow. If you’re concerned that you’ll forget to make your payments when they’re due, consider paying ahead of time or scheduling automatic withdrawals through your checking account so they can be deducted automatically.
3. Reduce Your Necessary Spending
The less you spend each month, the more you can put toward your savings goals, and that also includes necessary household expenditures. Shop around for better deals on necessities, such as utilities and cellphone contracts, and consider trying less expensive brands when you’re at the grocery store.
Just because you can’t completely cut out certain expenses doesn’t mean you can’t cut down the amount you’re spending on them.
4. Make Saving Automatic
Saving is easier when it requires less effort. So consider having the amount you’ve allotted for savings deposited directly through automatic transfers by your employer or bank.
Even if you start by setting aside just a small portion of your income, you’ll be well on your way to meeting your saving targets.
5. Take Advantage of Extra Income
If you get a raise, bonus, tax return, or some other form of unexpected cash, think about setting some, if not all, of it aside. After all, if you weren’t expecting to receive an amount of money, you won’t miss it (especially if you’ve gotten into the budgeting groove).
Every bit of extra cash you can put aside will help you reach your savings goals faster.
Watch Your Savings Grow
Review your income and spending each month and make adjustments as you go.
Getting in the habit of saving money can take some time, but watching your balance increase each month can make it a little easier.
Covering Unexpected Costs When You Don’t Have Savings
If you haven’t yet begun working toward your savings goals and are faced with an unexpected expense, it’s easy to get disheartened. But you don’t have to let those circumstances get you off track.
A payday loan is a potential solution that can help you meet your short-term financial needs. Find out if a payday loan is the right choice for you.