The Secrets To Saving Money Without Going Absolutely Crazy

You don’t need anyone to tell you that saving money isn’t that difficult. The concept is straightforward; you spend less cash every month, putting some away for safekeeping. You are saving money for when you need it – pretty obvious, right?

 

And yet, people still seem to have trouble saving money. Granted, financial problems can limit how much you save, but everyone still has the potential to save money. The only way you wouldn’t is if you live paycheck to paycheck and have no money after all of your expenses. Everyone can make lifestyle adjustments to put more cash away.

 

The biggest conundrum is working out how to save money without going absolutely crazy. What I mean is that people see saving money as this massive mission. It’s not always seen as a positive thing, but rather a negative. T

 

hat sounds strange, but this is the way a lot of people see it. They look at it as limiting the money you have available to spend. I guess that’s true, but you’re doing it for a good reason! Also, there’s a common argument that saving money means you have to deprive yourself of fun things. You have to literally just pay your bills, buy food, then save money. This isn’t the case, which is what you will see in this guide.

 

If you’re someone that struggles to save money or feels restricted when you save, this article is for you. Below, you’ll discover how to save money without going insane!

 

Work out your income and outgoings

 

Everyone should begin with the same step; work out how much money you make and how much you need to spend every month. This is budgeting 101 and is very easy for you to do. Simply look at your monthly paycheck, then look at your bank statements. If you have direct debits, add them all up, then add on any other key expenses.

 

For reference, you’re mostly looking at these things:

 

• Rent/mortgage payments
• Phone bill
• Energy bill
• Internet bill
• Water bill
• Subscriptions

 

Naturally, some of you will have more expenses than others. Also, you can definitely argue that subscription services aren’t key payments. However, they’re included in this section because they are monthly payments that you always make.

Additionally, if you’re self-employed, it’s harder to know a precise income every month. My advice is to look at your previous year’s earnings and take an average from that. If you can, get a min and max value, just to be on the safe side of things.

 

At this point, you will have two figures to look at:

 

• The amount of money that always leaves your account each month
• The amount of money you bring in each month

 

However, you’re not quite finished- there are still some other expenses to consider!

 

Work out your variable essential expenses

 

Things like food and gas fall into the category of essential expenses that can vary from month to month. You won’t spend the exact same amount on these things, so it’s difficult to understand how they contribute to your expenses. Try to find an average value that you can add on to your other expenses – think about things you buy all the time but not always at a fixed price.

 

One great way to figure this out is by using a budgeting app. These apps link to your bank accounts and categorize your purchases by category. Some will be able to go back and use your statements to categorize things, which does a fantastic job of showing an average monthly spend on things like gas, food, etc.

 

Now, add this to your expenses and you’re ready to see where you stand.

 

Subtract your expenses from your income

 

The next step is a simple one: subtract your expenses from your income.

 

For example, you have a monthly income of $3,000 and expenses of around $1,500. This leaves $1,500 after all expenses are accounted for.

 

In essence, the leftover figure is all the money you have available to spend or save each month.

 

Decide how much you want to save

 

Take your figure and decide how much money you want to save every month. There’s no set value for how much you need to save, so it’s entirely up to you. Some people say that 20% of your monthly income is a good place to start. If we use our example, this means you save $600 a month. In turn, you’re left with $900 to spend on non-essentials.

 

Once again, the 20% rule isn’t a proper rule at all, just a suggestion. You can save less or more depending on your financial situation. If you have a particular savings goal – say, a mortgage down payment – you may have to take a different approach. Look at your goal, consider how quickly you want to get there, and then judge how much you can save. This is a great approach to saving as you can pretty much work out how long it will take to save up for something.

 

Set up a standing order

 

A standing order is like a personal direct debit to yourself. You can set them up using online banking and it basically means you pay a set amount into an account every month. Obviously, we’ve missed out one vital step in this process – opening a savings account. We won’t cover that in this post as it’s too long to go over.

 

There are loads of accounts out there, so spend your time finding the best one. As a tip, opt for savings accounts that offer high-interest rates, since they will give you the most return on your savings!

 

Your standing order can be the figure you’ve decided to save or a fraction of that figure. It might be a good idea to save money in more than one way. For example, half of your savings can go into that account, then another half into an investment portfolio. Some investments are reliable and earn better interest rates. Still, there’s always a risk that you can lose money, so keep that in mind.

 

Here, you’re in a position where you’re saving money every month without needing to think about it. It all happens naturally, just make sure you have the cash in your account to pay the standing order!

 

Stay within your spending budget

 

The money that you don’t save can be your monthly spending budget. This includes everything that isn’t in your essential expenses. Effectively, it’s spending money to spend on whatever you like.

 

If you feel like spending some money on new shoes, go ahead. If you want to spend a few dollars on some mobile slots, be my guest. However, you need to stay within your spending budget!

 

In our ongoing example, you have $900 spending money each month. You can use all of it if you want, but you cannot go over it. If you go over it, you may ruin the rest of your budget and messing up your savings.

 

There’s one way you can gain control over your spending to avoid going overboard. Open another bank account, then split your spending money across each week in a month. For example, $900 divided by four gives you $225 of spending money a week. Put this into your new account and only use this for spending money. This way, if you run out of cash, you know that you have gone over budget.

 

For me, this method works, because it stops you from constantly checking your balance and worrying that you’re spending too much. You really shouldn’t go over budget, but you can use your new card with less fear.

 

Also, if you don’t spend anywhere near as much as you allocate yourself, you can save some extra money that month. Let’s say you only spend $700 out of your $900 – you could put that extra $200 in your savings, or put $100 and carry an extra $100 to the next month.

 

Work on lowering your expenses

 

The running example is a generous one. Not everyone will be gifted with so much money to spend and save per month. In some instances, you might be left with hardly anything when your key expenses are subtracted from your income. It’s still possible to save money, but you may need to heavily restrict yourself. You don’t buy anything other than the essentials, which tends to lead to a bad relationship with money.

 

Instead, go back to your essential expenses and look at ways of saving money. Here are some ideas:

 

• Switch energy bill providers for a cheaper contract
• Cancel your subscriptions
• Buy non-branded food products to save on your monthly food bills
• Use your car less to cut down on petrol
• Be more energy efficient at home

 

The list goes on, but this decreases your expenses, which will increase how much spending and saving money you have every month.

 

Hopefully, this guide makes sense and has taught you how to save money without going crazy. It’s not that hard, and you can break it down into two main parts. First, work out your budget, and then work on lowering your expenses to allow for more savings.

 

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Good luck!

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/