People often think that saving a great deal of money is difficult â€“ and it is, if you have a tremendous amount that must be saved within a very short period of time! However, just as with any big goal, if you want to save tons of money throughout your lifetime, it is often the small steps taken over time that can add up to one large lump sum of savings in the future.
Whatâ€™s the Best Way to Eat an Elephant?
When asked what is the best way to eat an elephant â€“ the answer is, â€œone bite at a time!â€ The same concept holds true when attempting to save a large amount of money. It is the small, yet consistent steps that can eventually add up to big dollars.
While there are a number of great ways to save money, it can get rather confusing if you attempt to use too many concepts all at once. Therefore, if you narrow your quest down to just five of the best money saving skills you can employ, your chances of success will increase a great deal.
Even Small Change Can Really Add Up
Even though it may not seem like much, make it a habit to save all of the loose change that you acquire throughout each day. For example, every time you purchase something and receive back an array of pennies, nickels, dimes, and quarters, put all of the change in a specific place at the end of the day.
Then, at the end of every month, count the change and deposit it into a bank savings account. While the small amount of daily change is not likely to be earth-shattering, you may discover that you have saved in excess of $100 at the end of each month.
In taking part in this exercise, even if you are able to save an average of only $20 per week, at the end of the year, you will find that you have easily saved over $1,000 â€“ and thatâ€™s no small change!
Pay Yourself First
There are times when we all feel that the bill collectors are winning the battle for our paychecks. However, a concept that has helped people save a great deal of money â€“ year in and year out â€“ is that of paying yourself first.
Many people have the benefit of being eligible for an employer sponsored retirement plan. Here, you are able to allocate a certain amount of funds each pay period into your account before you receive your â€œnetâ€ take home pay. The beauty of this type of plan is that it allows you to allocate funds for your future before paying any of your other creditors with the remainder of your income.
For those who are not able to participate in an employerâ€™s retirement plan, it is easy to set up your own account at a bank or other financial institution whereby you can have a certain amount deposited into a savings vehicle on a regular basis.
Do Not Go Into Excessive Debt
In addition to proactively setting funds aside, it is also essential to watch your spending on a regular basis as this, too, can have a substantial effect on your long term financial situation. One of the best ways to save money in this manner is to avoid going into excessive debt.
When you finance items on credit, you are typically charged interest for those purchases. And, if you are unable to pay off your bill each month, the amount of interest and other fees can rack up quickly until over time, you have essentially paid double or more than the original price of the item. Therefore the key here is, if you canâ€™t pay for an item outright, you may want to reconsider making the purchase at all.
Stick to a Shopping List
Even when it comes to shopping for everyday items such as food and household essentials, it is best to stick with a shopping list. In doing so, you can avoid making extra purchases on impulse â€“ usually for items that you donâ€™t need in the first place.
Prior to leaving your home, sit down and make a detailed list of the items that you will be shopping for. In addition, you can save even more money on these items if you use coupons or wait until the particular products are on sale.
Create and Use a Household Budget
If you really want to get a grasp on both income and expenses â€“ create a household budget and then stick to it! In doing so, you will get a precise idea of exactly how much money you have coming in and going out each and every month.
Remember when creating your budget that you should allocate a category for savings. This way, just as with any of your other expenses, you will be able to easily put a certain amount in savings that will really begin to add up over time.
George Gallagher is a finance and education blogger. He has recently been helping graduates find peace of mind with his companyâ€™s direct student loan consolidation initiative.