There are many ways to prioritize your money and how it is spent. Keep in mind that priorities vary from person to person. Most people want enough money in their savings accounts to feel comfortable retiring.
Meanwhile, others have the attitude that they only live once so why not large? The problem with living large and spending everything you earn is that when you stop earning, so does the lifestyle.
Taking risks, spending money, and living a luxurious life is something most desire but never achieve. This is because they tend to focus on the now and not the later. Start saving now so that when the time comes, aka retirement, you can enjoy everything you saved up for.
Early in life, you should save as much as possible ultimately investing in your future. That future could be investment opportunities that generate a lucrative or passive income.
There are too many times when people see a perfect opportunity to invest and do not have the capital. Even in emergencies or the loss of a job, most people do not even have a ninety-day savings fund.
The sad truth is we do not start saving money until later in life when we hope our income is high, but the real problem is how we spend it. People love to buy things that make them appear a certain way to society.
There is nothing wrong with buying something that makes you feel good but avoid doing it to appease others. Keep in mind this is your hard-earned money and you need to be wise in spending it.
Establishing a proper relationship with money can be hard if you are unfamiliar with it. Turning irrational spending into savings is much easier than you may think and comes down to mindset.
Allocate Your Income
Quit thinking in terms of dollars and more about percentages. Always take a percentage of your paycheck to put into a savings account. For example, set up a separate account from your checking and put 25% of your paycheck into that account.
Accumulate roughly three to four months (or more!) of expenses into it, calling it your emergency fund. This is a great way to get started and will no doubt keep you on track!
After establishing an emergency fund, move on to setting up another account in the same fashion. This will be your future savings fund that could be converted into an individual retirement account.
Having accounts set up like this will force you to appreciate money more and change your spending mentality. If you are reading this you must be serious about eliminating irrational spending.
Too much irrational spending happens especially when our financial goals are not clear. Writing out your financial goals will give you a clear understanding of what you want to happen.
From there it is a matter of applying a strong mindset and using willpower to resist irrational spending. There is nothing stopping you from your financial goals except you. You are the only person in control of your expenses so willpower is crucial.
If saving money is one of your goals you can start now, even if it is a few dollars. Just be sure not to touch your savings account no matter what the temptation. Avoid impulse buys at all costs!
Ultimately, having a bunch of money saved up could allow for investments or obtaining passive income. Imagine buying a duplex, living in one half, and renting out the other half to cover your entire mortgage.
You may not be making a profit but at least you have your mortgage covered from somebody else’s hard-earned income.
Related Article: “Making Money with Passive Income“
Eliminate Unnecessary Expenses
We have all been there: the spontaneous purchase that feels good at the moment but leaves lingering guilt (and a lighter wallet).
Curbing these impulse buys is crucial in transforming irrational spending into intentional saving. But how do we identify and eliminate these unnecessary expenses?
It starts with awareness. Track your spending for a month, using a budgeting app, spreadsheet, or even just a pen and paper. Categorize your expenses (rent, groceries, entertainment, etc.) Once you see your spending habits laid bare, you can identify areas where your money might be draining unnoticed.
Is watching your favorite show a priority over saving for a house to avoid apartment living forever? Get your priorities straight and you will have no problem canceling your streaming services.
Also, there are free show and movie services you can use like PlutoTV or Tubi.
There are plenty of other ways to entertain yourself aside from streaming content. You need to realize your priorities and focus only on them.
Consider these to save money:
- Subscription Services. Review your monthly subscriptions (streaming services, gym memberships, etc.). Are you using them all regularly? Can you consolidate or cancel some? This is one easy way to eliminate unnecessary spending.
- Dining Out. Eating at home is significantly cheaper than frequent restaurant visits. Explore meal prepping or setting a budget for eating out. Avoid going out every weekend and limit yourself to just once a month.
- Impulse Purchases. This is the hardest. Challenge yourself to a “no-buy” period, or implement a waiting period before making non-essential purchases. Does the thrill of the buy outweigh the long-term benefit of saving?
Eliminating unnecessary expenses does not have to mean feeling deprived. It is about making conscious choices and prioritizing your financial goals.
Every Penny Counts
You may not realize it at an earlier age, but later in life you will look back and regret your poor spending decisions. You will wish you had saved even the smallest amount.
By identifying and eliminating these spending leaks, you can free up more money to channel toward your savings and future financial security.
Saving money doesn’t require drastic lifestyle changes. Even small amounts, accumulated consistently, can snowball into a significant sum. But how do you stay motivated to save those spare coins and leftover bills?
Here are some strategies to inspire you:
- Set Achievable Micro-Goals. Break down your savings goals into smaller, more manageable chunks. Aim to save an extra $5 a day, $20 a week, or $100 a month. Witnessing frequent progress is a powerful motivator.
- The “Challenge” Mentality. Gamify your savings! Challenge yourself to a no-spend weekend, a month of brown-bag lunches, or a competition with friends to see who can save the most money in a month.
- The “Treat Yourself” System. Set up a reward system tied to your savings milestones. Reaching a micro-goal could earn you a small reward you would not normally splurge on, keeping you motivated and engaged.
- Think About Your Future. Imagine your future self – financially secure and grateful for the small amounts you saved consistently. This mental shift will help you prioritize building a healthy savings habit, penny by penny.
- Automate Your Savings. Set up automatic transfers from your checking to your savings account. This, “set it and forget it” approach, ensures saving is consistent, even if the amounts seem small at first.
Saving small amounts regularly is a marathon, not a sprint. Embrace the small wins, celebrate your progress, and find strategies that maintain motivation. Every penny saved is a step towards a brighter financial future.
Related Article: “How to Change Your Relationship with Money“
Give No Excuses
We all know the excuses: “I do not make enough income,” “There is just no room in my budget,” “I will start saving tomorrow.” But the truth is, these are just that, excuses.
Saving money is a crucial step towards financial security, and it is achievable for everyone, regardless of income. Here are some ways to break the cycle of excuses and start building your savings:
- Challenge Your Beliefs. Many people believe saving means deprivation. But reframing your mindset is key. View saving as empowering yourself to achieve your goals, whether it is a dream vacation, a down payment on a house, or simply peace of mind.
- Start Small. Do not feel pressured to save a massive chunk of your income right away. Begin with a small, achievable amount, even if it is just $25 a week. Consistency is key. Over time, you can gradually increase the amount you save as you get comfortable.
- Track Your Spending. Awareness is the first step to change. Track your expenses for a month to see where your money goes. You might be surprised at how much you spend on unnecessary things.
- Find Savings Opportunities. Look for ways to cut back on everyday expenses. Daily beverages or food expenses can add up fast, so consider preparing meals at home to save even more.
- Focus on Your Goals. Visualize what you are saving for. A dream vacation? A new car? Putting a picture or reminder where you see it daily can keep you motivated. Do not give up!
Remember, saving is an investment in your future. By prioritizing your goals and taking control of your finances, you will be well on your way to financial security and a life less burdened by money worries.
So ditch the excuses, take action, and start saving today!
References:
- Images courtesy of Vecteezy