As the famous quote says, “Never spend your money before you have earned it”, it is true in every sense. Saving money has become an essential habit to adopt if you want to lead a comfortable life in the future. Whether you are planning for a vacation, a wedding or even want to start a business, you need money for that. And you can have all this done if you have enough savings.
According to research, it is found that 1 in 10 people give up on their savings ideas within one month. Definitely it depends on the income of a person. As someone with a higher salary or high income, saving money is much easier for them compared to people with bare minimum salary or income. However, it is not impossible. If planned properly, individuals with low income can also acquire the habit of saving money.
Ways to Save your Money
Here’s a list of methods on how to properly start saving money in 2020. Follow these tips and start saving today.
Plan a Budget for your Regular Expenses
This is the first step you need to take if you want to start saving your money. You need to work out the amount you can afford to keep aside or save after clearing all your expenses. Planning makes you aware of how much money you earn and how much of it gets wasted in futile things. If you stop wasting your money on buying unnecessary stuff you will see an automatic difference in the amount that you are left with at the end of the month. This extra money can be added to your savings.
In addition to this, if you really want to save lots of money then you can cut down on some luxurious expenses of yours. Nowadays, if you face any difficulty in planning a budget there are various tools to help you with that. For example, the Money Advice Service website has a special budget planner tool which can resolve all your budget-related problems and guide you to make an accurate and affordable budget plan which will generate a lot of savings for you.
Clear all your Pending Debts
It is highly recommended to clear all your pending debts before you actually start saving. This is essential because if you continue to pay the interest rates on all your debts, then at the end of the month there will be hardly any money left in your account to save. Moreover, in most cases, the interest rates on debts exceed the interest that you get on your savings. The debts that you can clear first are the store card bills, credit card bills and personal loans. After clearing all these pending loans and debts you can start putting the rest of the amount left in your account for savings.
Fix a Target on the Amount you Want to Save
If you set a target on the amount you want to save, it will become much easier for you to achieve your goal. The target will keep on encouraging you to not lose hope and keep trying until you become successful in saving the desired amount. Fixing a goal makes people save a lot faster than those who do not have any target. You can also chalk out the amount you will need every month so that after sustaining all your living expenses, you will be left with enough amount to achieve your saving goals. Also, remember that you have a variety of options when it comes to savings accounts. The key thing to look for is interest rates – the higher the better. You can use a compound interest calculator to see just how powerful interest can be. Choose wisely!
Open two Bank accounts
Another thing you can do to acquire this habit of savings for a longer time is open two different bank accounts. This is important because once you have started saving your money, you will require a separate account to put that money. In addition to that, a separate savings account will also help you to keep a track on how much you are saving every month. It is always advisable to have at least three months worth of money reserved in your savings account. However, if you have already saved enough, you can think of opening another savings account for covering certain unexpected expenses like healthcare emergencies or house repairs, etc.
Minimize your Expenses and Reduce your Consumption
Most people tend to lose their hopes of saving money because they are unable to minimize their expenses. This happens because of the fact that most people waste a huge portion of their income on things they won’t need in the future or on stuff they can purchase at much affordable rates. However, they do not realize it until it reflects in their bank statements that they have no amount left to save at the end of the month. “Reduce, Reuse, Recycle” is key to minimize your consumption and maximize your savings.
To achieve this goal, you can start buying from sustainable clothing brands, eat more home-cooked food, spend less on luxurious items such as bags, watches, and shoes and reuse those which you already own. Furthermore, you can try to buy less of technical devices and buy only those devices which you actually need. As all technical devices have a high cost of purchase. Another thing you can do is buy less from the online shopping apps.
According to a report, people often tend to buy more from online apps than the actual stores. Therefore, you can easily understand how tempting some online offers can be. But you have to control this habit of excessive online shopping. What you can do is stick to a 24-hour limit after you have placed items on your cart before buying them. In these 24 hours, you can actually decide whether you actually want that product and if it is that really necessary after all. There is a high chance that after 24 hours you will change your mind. And you no longer want to buy that product.
Changing your travel habits can have an immense impact on your savings. For example, if you own a car, you can save the gas by stopping the engine at traffic signals. In case you completely rely on cabs for traveling, you can cut down on these costs by opting for public transport like trains and buses. You can even go to work on bicycles and make them your permanent mode of transport for shorter distances.
Invest your Money on Accounts with Tax Benefits
If you do not have plans on spending your savings in the near future (at least 3 years), then you can invest your savings on accounts that have tax benefits. These accounts can be funding accounts like Roth IRA, 529 education plan for your retirement or higher studies. Or else, you can opt for a health savings account. This will also give you additional tax benefits. It will also help you in raising your total gross savings every year automatically.
In case you invest in the Roth IRA funding account, you will be placed in a higher tax group when you will ultimately withdraw your money. This investment has proven to be extremely beneficial for those who are early in their career. All their contributions will become tax-free if they do not withdraw money from this account until they turn 59 years and a half of age.
Another way of increasing your savings is by choosing the 529 plan. If you have children and like every other parent, you too want to secure your child’s future by saving funds for his college studies, then you can definitely choose the 529 Education plan. Under this plan, your account earnings will not be taxed by the state in case all your earnings are spent on the education of your children. These education expenses mostly include college fees, school fees, stationary expenses, tuition fees, etc. In some special cases, you can also claim for a reduction on your state taxes depending on your contributions.
Save the Windfall money
Windfall money is the money you get suddenly from some unexpected source. This extra money can be received if you receive a huge amount as your salary bonus from work. Or if you get some cash as a gift from your grandparents, family or even friends on your birthday or some other occasions. It is highly advisable not to waste or even use this money. As the money that you got is excess to your income. Therefore, you can put the entire money directly into your savings account.
These were the simple tips and tricks you can adopt if you really want to start saving your money in 2020. Hopefully, these solutions will help you to save money, a habit rather than a choice.