There is only two ways to put more money into savings: make more or spend less. You may have trouble doing either. This blog post is designed to give you actual tasks, expenses to look at, and mindset changes that may help you start to build your savings account.
Why Do You Want To Save Money?
If you are only living paycheck to paycheck, spending all of the money you make, you definitely need to save money. Why? Because any emergency or extra need can easily push you into spending on a credit card or going into default on your bills.
Saving allows you to have extra for when you really, really need it. And if you can figure out how to save, you can figure out how not to spend your emergency money.
Also, if you want to invest, you need money to invest. People don’t just hand you money to invest for them. Going into debt to invest is a really bad idea, especially if you can’t afford the bills you have to begin with.
If You Are A Couple, Both Of You Need To Commit To Saving
It is tough when one of you wants to cut expenses and the other spends whatever is there. Sit down with your significant other and commit to a plan of attack that both of you can live with.
Excuses Are Not Your Friend
If you find yourself making an excuse for each suggestion I give you, you are probably going to have a really tough time finding your way to saving.
For instance, if making more money means more education or moving to a bigger city and you are unwilling to do either, you will probably find that your income stays fairly fixed.
I am not saying that you need to take every suggestion I make, but there may be tough choices that need to be made in order to move the needle.
Cutting Expenses Is Far Easier Than Increasing Your Income Significantly
So there you have it… If you want an easier way to save, you have to take a good look at your expenses. That is definitely the first place to start.
Bigger Cuts Possible From Your Major Assets
The biggest cuts you can usually find are from your major assets such as your house or car. If you own your home, take a good hard look at whether your home (or apartment or trailer) is right for you. It may just be too darned expensive for you and it’s time to make a big move so that it’s easier to save.
Of course, selling your house and moving is a big project and you need to make sure it makes more sense to sell than to not sell. Take a look at your moving budget to know for sure before you make a decision.
Most people are not going to want to sell their home, and I understand that. However, just consider this: Maybe you need a bigger place and you could move to a lower cost area and get the space you need, all while paying a smaller amount. Consider how much you would have to pay to drive further to work and such if you made this kind of move.
Now considering your vehicle or vehicles: First do you have something you don’t use much, like an RV, ATV, boat, etc? All vehicles are depreciating assets and do you really need the toys? Second, could you live without a car? Or without one of your cars? I would definitely consider it. Many people these days use Uber or Lyft to get from place to place. Except for commuting, ride shares definitely save money.
If you are commuting with all of the vehicles you own, you may want to consider owning a more fuel efficient car. If you own your car outright (no payment), this may not be the best way to go. Because an added payment and higher insurance is likely to offset your savings. Otherwise it might be something to consider.
Other Fixed Expenses
Most people have their home and car expenses, but you can also take a look at other fixed expenses, such as utilities, cable tv, internet, internet services, and other things you pay a fixed amount for monthly. You can also take a look at yearly expenses by the way, such as that auto club.
Write everything down (or use Excel) for all of your fixed expenses and analyze each and every single one to see if there is anything at all that could be reduced or eliminated. (Yes! Eliminated) If you are living paycheck to paycheck, perhaps that cable bill is not as needed as you think it is. But I’m not just talking about the cable bill…
Variable Expenses Can Be Tracked
If you didn’t write down your electric bill because it changes from month to month. Write it down now. Figure out what your average electric bill has been for the past 6 months. You can usually get this kind of information online.
For most utility bills that are not fixed, you can request to get on budget billing so that the amounts are the same from month to month.
Gasoline and vehicle service should also be tracked. Just add up how much you’ve spent in the past year and divide by 12. Perhaps you have a better way to figure out your average? Go for it!
Each variable expense should be analyzed to see if there is anything you can do to reduce them. Perhaps yes, perhaps no. A $5 savings is still a $5 savings.
Out Of Pocket Expenses
One of two things happen every month: You dig cash out of your pocket to pay for something, or you use a credit card to pay for something. Assuming this is not one of the types of expenses we have already talked about, it needs to be tracked. It really should be tracked to the type of expense but if the expense doesn’t happen very often, it might be easier to group some expenses together. “Out of Pocket” may not cut it. Especially if you are beating yourself up to spend less.
Many people carry around a notebook to track the cash they spend. If you spend on a credit card (and pay it off every month as you should), you can get the transactions from your credit card statement. Put them into your list of expenses too.
It is very important to know what eats your cash. Hopefully once you get good at tracking your expenses, you can also get good at deciding what is important to you and what is not.
Should I Cut The Dinner Out, Night At The Movie…
Dinner or a night at the movies can be a pretty major expenses, especially when they are happening nightly. Sometimes, though, it is important to enjoy your life. Make a decision as to what is important, and what is not. Perhaps less would be better?
Ideas For Increasing Your Income
I think I dread talking about this more than talking about expenses. You are *blank* (fill in here). For instance, you are a truck driver. That is a definition for who you are. But what if it’s not? So let’s look at this just a bit.
Probably the easiest way to plan for an increase in income is to ask your boss: What can I do to earn a promotion? What would my next promotion be? If you like the answers to these questions, you have your path. If you don’t, maybe it’s time to consider what your path should be?
Often the path you want requires an investment. Education or other training maybe? Maybe that requires the next 4 years of your time? Maybe your path requires a move that you have to work out with your significant other.
Sometimes a change of path requires a step backwards to move forwards. How would you handle a reduction in income to achieve an increase in income in the future?
All things to think about and maybe you aren’t quite ready for this yet.
How about a side gig? Could you fit in a little extra time per week doing something else? Many people are driving for DoorDash or Veyo. I know somebody who stocks shelves at night for Walmart after his bank job. Personally, I am not sure I could handle two full-time jobs (or even a job and a half), but maybe you could?
Side note – I do work 60 – 70 hours per week for my consulting business most of the time. I did also spend years going from having gotten my Associate’s Degree to getting my MBA, all while helping to raise a family and working full time.
You Got A Raise, Promotion, Or A Lump Sum
If you got some sort of raise or a lump sum (like an inheritance), it is time to remember to bank it. Especially a regular increase in earnings… Because I know what I do when I get a raise… Think about all the ways I can spend it.
This raise could get you to 20% savings. Or at least make progress towards 20%. I know that it’s no fun to think about, but remember how you’re living paycheck to paycheck?
And don’t leap frog into investing. You still need to have a good rainy day fund.
Make sure to let me know if this has helped.