Of course, putting money away for a rainy day is a great idea, but many people find this easier said than done, especially if they are already living from paycheck to paycheck. However, there are some habits you can develop to protect your current finances and ensure financial well-being for the future.
You may start by establishing a budget, then reducing your spending, getting out of debt, and, finally, saving money for emergencies and your long-term future. Check out some tried-and-true techniques that have worked for others in your current position and save for your financial well-being.
Creating a Budget That Works for You
The basic idea of using a budget is understanding where your money goes. You could start with a simple budget that just tracks your income and expenses. For better results, however, you may want to set up a plan for making payments on time and setting money aside for expenses that come up between paychecks. If you’ve never created a budget before, you’ll find that there are many resources available to help you get started. Start by reading through budget guides online and then determine how you want to keep track of your budget, such as using a spreadsheet on your computer or printing off a tangible plan for financial well-being.
Reduce the Amount You Spend Between Paychecks
Of course, you won’t get to the point where you can save money without reducing the amount of money you’re spending each month. Naturally, you must stick to your budget for it to be truly effective, and as the months pass, you’ll make adjustments to be sure the budget stays current. If you’re wondering how you could possibly reduce your spending, review the following suggestions:
- Plan your meals ahead of time. It is much easier to resist the temptation to pick something up on the way home when you’ve already bought groceries and prepped them for specific meals.
- Take coffee, water, snacks, and lunch to work with you. You’ll cut out a lot of unnecessary spending by preparing drinks, snacks, and lunch at home.
- Watch prices at the grocery store and use coupons for items you plan to buy. When you find items at a low price, buy a case or two. Make sure you know how to store your items properly. This habit is a good way to prepare for a loss of income or a natural disaster.
- Scope out your local thrift and discount stores. You could find name-brand clothing, books by your favorite authors, and great household décor.
There are a lot of great ideas for spending less; do a quick online search to find more and incorporate them to ensure financial well-being for the future.
Get Out of Debt
When you’re short on cash, it’s easy to pull out your credit card; you can’t go without groceries, after all. However, that debt adds up quickly and continues to grow even when you start to pay it off. It may end up taking years to pay off and the total amount you pay will be much, much higher than the original amount of debt. Start your journey to a debt-free life by learning how to “check my free credit score” and understanding how your debt-load and resulting credit score affect your life.
Save Money for Emergencies
One of the biggest stumbling blocks for people who are trying to bring their finances under control, get out of debt, and establish healthy savings for the future is the emergency expense. This is particularly true for people trying to survive with aging secondhand items. A basic emergency savings fund should be around $500. Your bank or credit union may help you set up a fixed amount that automatically transfers to your savings account. The purpose of your emergency fund is to pay for unexpected medical expenses, auto repairs, and unplanned home repair expenses, such as a burst pipe or backed-up toilet.
One way to reduce the threat of and amount of emergency expenses is by consistently maintaining your appliances, automobiles, and home. You can also save money on clothing by using proper laundering habits. Save money on food by learning to store leftovers and ingredients to avoid waste. With healthy meals and regular exercise, you may also save money on healthcare.
Build Up Your Long-Term Savings and Incorporate Investments
It is possible to save thousands of dollars a year even if you don’t make a lot of money. It will take some grit and determination, but these are qualities you can strengthen. One of the best ways to tackle this seemingly impossible goal is to start with tiny steps. Maybe one of the following ideas would work well for you:
- Invite a friend or family member to participate in a savings challenge with you. You could start with something as simple as saving one more penny a day than the day before. On day one, you’ll save a penny and then set aside two pennies the next day. On the last day of the year, you put $3.65 in your savings. It doesn’t sound like much of an expense for each day, but your total at the end of the year, you’ll have almost $700 saved.
- Set up a savings account that is inconvenient to access. This should be separate from your emergency savings account. It’s a good idea to set this account up to pull a specific amount from each paycheck that goes into savings. Try setting aside $200 from each paycheck and have it removed before you ever see it. If you can’t save that much each month, start with 5, 10, or 20 percent of your paycheck.
- Talk to a tax accountant about the best way to file. If you’ve been getting a big refund each year, you’re basically letting the government earn interest on your money. It’s a better financial decision to adjust your withholdings and put that money into your own high-interest savings account. This way, you’ll earn interest on your money. It’s also possible that you’re paying more taxes than you need. A tax professional can help you lower your tax bill.
- Learn how to invest. If you’re overwhelmed at the thought, start out with apps that basically invest for you. When you’re ready, reach out to a financial provider and learn how to diversify your investments. Investing is a great way to make your money work for you, drawing interest that can then be used to strengthen your investments.
There’s a familiar quote from Lao Tzu that says, “The journey of a thousand miles begins with one step.” That first step toward financial security with healthy savings and retirement doesn’t have to be big. The effort you make each day moves you closer and closer to your end goal. With a solid budget, decreased spending, reduced debt, and regular payments toward savings, you’ll find that it is possible to improve your financial health and long-term prospects.