How to Save Money: 5 Key Elements to Save More Money
Are you trying to figure out how to save money from salary, paychecks, allowance, etc? Saving consistently and learning how to do so can be an extreme challenge, so if you’re feeling this way, you’re not alone. The list of 5 elements below will teach you the foundational skills and ways to save money for you to build upon. So, if you want to know how to save money, keep on reading. Let’s do this!
Earning an income and figuring out how to save money form salary or other forms of income can be a big challenge. If you’re anything like me, you’ve likely searched and searched to find out some foundational ways to save more money and it’s stressing you out. Lucky for you, I’ve learned a lot over the years and am ready to share some of the lessons that have come (ever so painfully at times).
You are going to find so much more clarity on how to save money from salary, paychecks, tips, you name it. Whatever your form of income, you can save consistently and build the wealth and life you dream of. Despite what you may think, the way can be quite simple.
Let’s face it, finances are typically stressful. But let’s work through that together. I LOVE finances, I know a weird thing to admit, but I am so excited to share with you 5 main ways of how to save more money. I’ll keep it as clear as possible, so let’s go ahead and get started!
This post is all about how to save money from salary, paychecks, tips, etc.
How to Save Money
1. Set a Goal and Make a Plan
Saving money is such an arbitrary concept when you don’t know what it is you’re saving for. Not that saving without a goal is a bad thing, rather staying consistent and motivated is much easier when you know what your end game is.
How to Set a Goal:
Ok, let’s not overcomplicate this. How do you set a goal? Personally, I really like to give my self some time to reflect and think about what I REALLY actually want and need. I’m not talking about random products you see in an advertisement that you’re like oh I like that I want it. No, it’s the things that will help form your identity and bring joy to you. That make life more enjoyable.
I like working with examples, so I’m going to play out a scenario, work with me on this one. So let’s pretend you’ve been reflecting and you are very passionate about woodworking. Currently you’ve been honing your skills and forming your craft, but it’s been challenging as you drive a little sedan, and you can’t fit many supplies in there. The thing that will really help make your life easier, your craft more enjoyable, would be a truck. Ok, you REALLY actually want a truck. It’s not to look cool, not because your neighbor has one, etc.
**side note: if you were making most of your income from woodworking in this scenario, the truck wouldn’t only be a want, it would also be a need. In order for you to continue to increase your income, thus increasing your ability to save, you need to invest in your business, etc. You get the point! It is also important to keep in mind needs and wants while setting goals.
A truck, nice! You’ve identified your want/need and you’re ready to start working on your goal.
We’ve all heard of “SMART” goals, and I don’t mean to beat a dead horse, but bare with me. It’s time to set a SMART financial goal. If you don’t know what a SMART goal is, here is what the acronym stands for:
S – Specific : answer what is needing to be accomplished, by whom, etc.
M – Measurable : you’re assigning an exact amount, %, or other metric to your goal
A – Achievable : reality check time – is this goal actually reasonable? If not, adjust. no biggie.
R – Relevant : ask yourself why, if the answer is aligned with your big picture, you’re good!
T – Time-bound : when will the goal be accomplished by? consider including a start time too
You’ll be shocked at how useful this practice is as you set your financial goals. You’ll be unstoppable as you get very granular with what you want/need to accomplish. I really like this article to help understand SMART goals more.
Alright, so to wrap this part about goals up, I’ll give you an example of what your truck SMART goal could look like. “I am going to save up $20,000 and buy a Ford F-150 that is between 5-10 years old by December 31st of this year.” WOW!!
How to Make a Plan:
I hope you take the time to really put this into practice. I’m getting excited just typing this, the energy and excitement from setting goals like this is incredible.
Let’s move on though, I gotta tell you how to make a plan to achieve the goal you just set! Just know, I’m going to talk about how to make plans for financial goals, but feel free to substitute any type of goal you have in here. It works
The first thing you need to do as you start making your plan is look at your time horizon, and then break it down into as many “chunks” as you want. Do the same thing for the total amount of money. (**Let’s say you had a goal to lose weight, you could sub in pounds for dollars**).
I like the example we were working with. It’ll help illustrate how to do this.
Let’s pretend it’s January first. Your goal stated you need to save $20,000 by Dec 31st. That gives you one full year. Let’s break that down into months first. So divide $20,000 by 12 to give you the amount you need to save per month this year. That gives you $1,666.67. Nice!
I could then divide that by 2 again since I get paid twice per month, and I want to save each time I get paid. So that gives me $833.33 from each paycheck goes into my “truck savings fund” for this whole year!
Another element you’re going to want to plan out, and perhaps put in your calendar, is when you are going to start looking for the truck you want to purchase. Depending on the market, you may want to have that in your calendar to start looking Nov 1st. You choose, but plan that piece too!
And there you have it! You’ve now set your goal and made your plan and you are SO MUCH more likely to save now that you have a reason behind it!
2. Create a Budget
I’ve created an entire post about this that you can find here: How to Make a Detailed Monthly Budget.
The reason why creating a budget can help you save more money is because it gives you a detailed plan for each month’s income and expenses and you can input your plan you made above into your budget.
Here’s what I mean.
Ok so in the above example you found that each month you need to save $1,666.67 per month. If you have a monthly budget, you can easily put a line in for that amount to transfer into savings so that you don’t overspend in other areas making it much more challenging to achieve your goal.
One recommendation here is that you save first, I like to call it “pay yourself” first. After you put that money into savings, you are ready to pay everyone else who wants your money.
Budgets are one of the most powerful vehicles to help you save money from your salary or other sources of income.
Make it happen!
3. Automate your Savings
The less you have to think about doing something in order for it to occur, the more likely it’ll happen! I like to think of this like setting an automatic timer for a robot vacuum. If I don’t set that schedule up, I am MUCH more likely to forget to run it.
Similarly, the more automatic your savings are, the more likely it’ll actually happen.
How can you automate your savings? Great question! So glad you asked lol
Most employers will allow you to split your direct deposit paychecks into 2 separate bank accounts. This is my favorite method. If this is an option for you, you can have them put 20% into your savings account, and 80% into checkings! Easy peasy.
Another way, especially if this isn’t an option for you, is to have what I like to call a “payday ritual” that with practice can become an automatic habit.
A payday ritual is a set of activities that you do each time you get paid. And of course, the most obvious task to do is transfer the amount you’ve pre-determined into savings. Just to help explain a few other things you may do as part of this ritual: pay utility bills, set aside certain amounts for taxes, buy stock, fund retirement accounts, update your budget, etc. You get the gist.
There ya go, whatever way you can find to make it automatic, the better equipped you are to know how to save money!
4. Lower Your Expenses
I bet you knew this one was coming. Womp womp! Way less exciting than the other things mentioned above, but lowering your expenses overall can be a very effective way to save more money.
One particular expense to look into is your subscriptions. You’d be shocked how many random subscriptions you are paying for that you don’t really need, that you don’t really use. And if you really need it, could you potentially share the cost with someone else?
I digress, but check those out and cancel what you can, each bit really adds up.
Another thing to consider is negotiating your bills, including utilities. Most things are negotiable, so try it out. If you’re a good driver, you could get a better rate on your insurance, that type of thing.
The biggest impact area that cutting expenses to contribute more to savings is your discretionary spending. This includes things like eating out, shopping, etc. These are easy areas to transfer over to savings. Just keep in mind, if you are hating your life and how it feels to do this, then it’s less likely to stick. Make sure any changes you make are maintainable.
5. Increase Your Income
This one feels like DUHHH haha but it’s totally true. Increasing your income is probably the best way for you to increase your savings amount.
There are so many ways to increase your income, I mean it is all over social media, just do a little search. You could start a side gig, sell unwanted clothes/items, ask for a raise, so many options! Learning new skills will help you make more income.
The point here to remember is that as you increase your income, keep your expenses the same or less. If you get all excited because you increased your income and go spend it all, you’re not going to save any more than you did before. So any additional income that you bring in will be specifically for your savings goals.
And there you have it! Those are 5 amazing ways of how to save money from salary, side income, wherever the source. You can do it. Saving money will propel you into the life you want to live.
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