Saving money is hard. Between rent, bills, and all of life’s little surprises, it can be difficult to find extra money to put away every month. But there are ways you can make saving easier on yourself—and still reach your financial goals in 2023. Here are our tips for creating a budget that works for you and building an emergency fund so that money is never an excuse for not doing something fun.
Create a budget
Creating a budget is the first step in saving more money. You need to know exactly how much money you have coming in and going out, so that you can make adjustments accordingly. This will also help prevent any surprises later on when bills come due that may be too much for your current income level.
Once you know what your budget looks like, take some time to look at all of your expenses (paying off debt is an example of an unnecessary expense) and decide which ones are worth keeping and which ones aren’t worth it anymore based on what they’re costing you in terms of time or money (or both). Then start cutting back on those things until there’s only essential stuff remaining like rent/mortgage payment, utilities (electricity/gas), insurance policies etcetera…
Build an emergency fund
An emergency fund is a savings account that’s strictly reserved for unexpected expenses. Ideally, it should be enough to cover three to six months’ worth of living expenses or your standard budgeted monthly amount.
Not having one means you’re more likely to resort to credit cards or other high-interest debt in times of need. You’ll also probably have more trouble affording those things (like medical bills) when the unexpected happens—and it will happen, eventually.
So how much should you save? The short answer is: enough so that you feel safe and confident about your overall financial situation. If that means saving and spending nothing on “fun” stuff for two years straight, then do it! Granted that’s not exactly fun…but it’s better than defaulting on a credit card bill every month because something expensive happened unexpectedly (like an illness).
And then save for retirement
Once you’ve ensured that your emergency fund is in place and your debt is paid off, it’s time to start saving for retirement. The sooner you start saving, the better—in fact, starting as early as possible is one of the most important steps towards a healthy financial future.
The best way to save for retirement is to open a PPF account and start investing in index funds.
Save automatically
The best way to save money is to do it automatically. Saving regularly is one of the most important steps in saving for a specific goal, whether it’s a vacation or a new car. The best way to save money on a regular basis is by setting up an automatic transfer from your savings account into another investment account(another bank savings account) or a joint account (if doing along with a partner).
If you’re saving for something specific (like a vacation), try starting small and working your way up as the months go by.
Cut unnecessary expenses
- Cut your fixed expenses. The biggest thing that people do to get out of debt is they cut their expenses. They start living below their means, and they figure out how much money they can afford to spend on a monthly basis, including rent or mortgage payments and utilities like electricity, home bills etc. Then they take a look at their discretionary spending—things like movies, clothes, eating out—and they reduce that as well by finding cheaper alternatives (watch Sony Liv – Shark Tank Season 2 🙂 instead of going to the theater) or cutting back (eat at home more often).
- Reduce your variable expenses. These are things like fuel for your car or groceries that fluctuate from week-to-week based on how much you use them; this category also includes any kind of entertainment like movies or concerts where admission fees aren’t fixed but rather dependent upon demand for seats at the event itself. If there’s something in this category that isn’t necessary for your survival (e.g., cable TV), then consider cutting it out entirely if possible; otherwise see if there’s an option available with lower monthly payments than what you’re currently paying each month so that over time it will save money without having an immediate impact on your budget.
Save your windfalls
There will be times in the year when you receive a windfall. Maybe it’s a bonus at work, or maybe some money comes your way from an inheritance or selling something in your apartment complex or with your free lancing gig. Whatever the source of the money, if it’s more than what you have been saving, use it to pay down your debt—preferably your highest-interest debt first.
In other words: Don’t go out and spend this windfall! Use it to pay down any outstanding balances on credit cards (and don’t forget to stop using those cards!), loans and/or car payments that are probably costing you far more than whatever interest rate they’re charging right now.
Look for ways to increase your income
- Work more hours. If you’re feeling overwhelmed or anxious about your financial situation, the easiest way to increase your income is to work more hours. Even if you have a full-time job, it might be worth asking if there are any opportunities for overtime or extra shifts.
- Get a second gig. If working more hours isn’t an option, consider getting another job or side hustle on the side (if possible). This will help boost your cash flow and give you some extra cushion in case of emergencies or unexpected expenses.
- Ask for a raise at work. Your company may be willing to give raises based on performance evaluations and how much business they generate —and even just showing up with this attitude can make all the difference when it comes time for conversation! Just remember: No one will care as much about saving money as much as yourself does so take charge of your own savings plan before asking someone else how they do theirs.
Avoid debt
Debt is a trap. Avoid it at all costs. If you are in debt, the best way to get out of it is by changing your habits and spending less than what you earn each month.
If you need help paying off your debts, consider speaking to one of the coaches at GoalFi that can help carve out a plan for you to consolidate your credit card payments into one monthly payment that is lower than what you currently pay per month on each individual credit card.
Conclusion
Remember, saving is a process. You won’t get it right the first time, but once you start making small changes to your budget and spending habits, then those small changes will snowball over time into bigger ones—and soon enough you’ll have reached your savings goals.