It is not enough to want to save money, it is also important to know how to save money using methods that work. This is because it is easier to spend money than to save it.
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It even becomes more difficult to keep part of your money away when you are an average income earner or a struggling student.
Recent surveys found that 3 in every 10 people don’t have any savings at all. Also, 5 out of 10 people who have a saving don’t save enough. [source: yahoo finance]
Knowing how to save money effectively and quickly will make you be among the few percentages who have something to fall back on in case of emergencies.
But, unfortunately, most of the time, some of us can’t save money because of the habits that we have about money. It is therefore important to learn how to save money quickly using methods that work.
This article will show you the best and effective ways on how to save money as a student and also as an average income earner, without stress, until you finally develop that money-saving habit.
1. Keep track of how you spend your money
it is obviously difficult keeping record of every dollar you spend but this is important if you want to know how to save money. This activity will help you track how and where you spend your money.
The idea is to figure out how much you spend and be able to make a wise decision from it.
Get a book and write everything you buy in it. You can also look for record-keeping apps like Microsoft excel to keep these details. Make sure you write everything down no matter how small. Whether it is $1 or $100, you must document everything. This includes the money that you spend on groceries, gas, internet, mortgage, and to mention these few.
When you write the smaller amounts, you will soon realize that the money that seems little to you is worth much. $3 spend on a cup of coffee daily can sum up to over $1000 in a year. That is too much money spent on coffee. These little details will give you a clue on how to save money.
If you use your credit card for most of your transactions, there are free apps that can help you to keep track of your transactions. Or get a statement of account from your bank to know where your money is going to.
These details will help you know where and what you spend your money on. You will know where you spend the highest amount on as well as the lowest amount. This will help you reduce your spending or cut out unnecessary spending altogether.
Here is a cool video that explains how to save money using excel to track your expenses
2. How to save money with a budget
A budget is a financial estimation of your income and expenses within a period. A budget is a plan that guides you on how to spend money effectively.
You probably do not have enough money as a student or average income earner. So you want to know how to save money. A budget will help you to spend money on the things that are important first.
A budget balances your income and expenditure. Therefore, you can easily avoid debts with a budget. You can cut out all unnecessary needs or include them in a new budget when there is enough money for it.
Also, a budget helps you to save more money as you can include how much you want to save in your budget. Saving money becomes easier this way as you already have a plan for it.
It is advisable, if this is your first time, to start by saving a small percentage of your income. Getting started is usually the hardest part of saving. Starting small will help you break the resistance and at the end of the day make saving easier for you.
3. Remove your savings first
The first thing to do after making your budget is to remove your savings. This is because it is hard to remove your savings after you start spending money on other things.
Human needs are insatiable. If you do not remove your savings first, you may end up spending it or reducing the amount you want to save.
Make your saving process automatic. If you have a fixed income you can automatically save a certain percentage. To do this, talk to your bank so that they will help you out. You may need to create different savings account different from your regular account to make it easier.
Forcing yourself to save money will remove the temptation to spend more money. You may need to cut out unnecessary spending to make the process easier. You can do that using a scale of preference which I will discuss below.
4. How to save money with a scale of preference.
A scale of preference is a list of your needs in an order of importance. This is where you list everything you need to spend money on and assign numbers to each of them. The most important one will be number 1 and the number continues like that to the last number.
This will make you focus on important needs and cut out the ones that are not needed. You can also postpone those things that can wait until another time.
Most people are not able to save not because they don’t make enough money. But because they spend too much money on things that they do not need. That is why this article will teach you different methods on how to save money.
A scale of preference has two advantages. One is that it let you save more money than you would normally save. The second one is that it let you be able to prioritize what you need the most when buying things.
5. Have a goal that helps you save
We are all motivated to do more when we have a goal. It gives us a sense of responsibility and something to live for. It is the same thing when it comes to having a goal for saving money.
You can’t know how to save money without having a reason to save money in the first place. People who have a saving goal tend to save more money faster than those who do not have.
To start with a saving goal, decide what you want to save for. Your goal may be saving towards retirement, school, vacation, or anything. This will determine the amount that you need to save.
After you decide how much you need to safe, you need to determine how soon you want to meet this goal. Divide the total amount you want to save by this duration to know the minimum amount you are to save per time.
Remember that the hardest part is always the start. Therefore do everything it takes to break the resistance and start saving immediately. Always set realistic goals as that will make you get started immediately.
6. Reduce your accommodation cost:
This is one of the highest costs that most people pay on a daily. Anything to cut your accommodation cost will help you set more money aside and get extra for saving.
Accommodation is a basic need and you can’t avoid paying for it. However, you can reduce the amount you spend on accommodation by doing some things:
a) You can move into a smaller house if a smaller house will meet your needs.
b) If you have extra room in your house you should consider renting it out. Making more money will help you save more money fast. How to save money as a student on accommodation is to have a roommate to share the rent.
c) You should also consider renting an apartment instead of a home. Although you don’t have to deal with neighbors when you rent a home but the apartments are cheaper.
7. Learn to differentiate between your needs and wants
It is important to balance your needs and wants if you truly want to achieve financial freedom and meet your goals.
A good way to save more money is by using the 50/30/20 rule. That is, you use 50% of your income on your needs and 30% on your wants while the remaining 20% goes for savings. This is an effective way of how to save money fast.
There is a thin line between needs and wants. Needs are the basic things that you cannot do without. They are usually essential for survival and they include such things as what to eat, what to wear, a place to sleep, and what to do in case of a health emergency.
Wants are things that you desire but you can do without them. For example, you want to buy a new car but your old car is still in good condition. You want to eat out when you can prepare your food at home.
It is difficult to ignore your wants. But if you want to know how to save money you must focus more on your needs and reduce your wants.
Here is a video that explains how to save money using the 50/30/20 rule.
8. Avoid debt and buying on credit
A credit card allows you to make a purchase now while you pay later. This sounds like a fair deal. You buy whatever you want whenever you want it without paying immediately.
In the end, buying on credit will hurt your savings. The companies that issue these cards make more money at the end of the day while leaving you with debts with heavy interest rates.
Try at all costs to avoid debt by buying only things that you want. Also, learn to spend lesser money than you earn to avoid running into debt. Because when you have debts, you cannot save.
9. Always buy things with a list
You should shop smart by always going to the market with the list of things you want to buy before leaving the house. Don’t ever go to the market thinking you know what you want.
Going to the market with a list will ensure that you don’t forget what you want to buy. And more importantly, the list guides you to buy just what you need thereby allowing you to save more money.
Without a list, you are most likely going to do impulsive buying. That is being carried away to buy things you don’t need. At the end of the day, you will regret buying them because they have no use and you would have wasted your savings.
Go with a list and stick to it. That is how to save money fast. Once you have exhausted the list, go back home to avoid the temptation of buying more things that you do not need.
10. Compare price before you buy things
You should not be in a hurry, when you go to the market, to buy things and leave. Remember, you are looking for how to save money.
Always compare their prices from two or different stores. You may be surprised at how much money you will end up saving if you do that. And if you are making your purchase online, always compare the price from different websites to be sure that you are making the best deal.
Another way on how to save money by comparing prices is to look for an alternative brand of the same product. Brands with bigger names are not necessarily the best brand. Always look for an alternative brand that is cheaper.
Always manage your subscription. Recurring payment has its benefits but you can easily forget to cancel your subscription when you are no longer using the service. Check the subscription you are not using or interested in from time to time and cancel them.
Another way to cut costs, by comparing prices, is to do away with your cable subscription and go for a cheaper option like Netflix. They allow you to stream a lot of movies and the price is cheaper.
11. How to save money by buying used things
You should also shop smart by considering buying used things if you plan to save more money. There are options to buy fairly used clothes, devices, and many other things.
You can check organizations like The Salvation Army for cheap clothes. You can also check online on sites like eBay to get the best deal. You may also be lucky to find new but cheap things in some thrift stores.
As a student, you can learn how to save money by buying used items too or exchanging your old items with other people. For example, you can sell your textbook that you no longer need and buy from others too.
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