You
may think that a coffee everyday on the way to work isn't going to
affect your expenses, and that is the mentality of many Americans.
However, these little expenses accumulate, until you are at a point
where you are now in debt.
The first thing you need to do when planning to save money is
to find out where your money is actually going. Like the above example
I already gave, if you stop for a coffee everyday on the way to work,
you have already identified a daily expense and you should do what you
can to cut back, even if it is buying a coffee every second day instead
of everyday. The truth is, almost everyone has a habit that translates
into an expense, whether it is a coffee everyday, a pack of cigarettes,
or lunch at their favorite café. For example, if you go through a pack
of cigarettes every second day, you end up spending $120 a month, which
is $1,440 a year. I know that you can't just quit smoking, but even if
you cut back to a pack every three days, you are only spending $960 a
year, which equates to savings of $480 a year.
About 90 percent of people plan to save, yet they never have a
chance to as they end up spending their income before the end of the
month. Obviously, every one has bills to pay and they must buy food and
other necessities, however, the best practice is set aside a percentage
of your monthly income for saving. A general rule of thumb is that 10
percent of your income should be placed in a savings account,
regardless of whether it is $20 per paycheck or $100 per paycheck, any
bit of savings is beneficial in the long run. Additionally, saving
immediately after receiving your paycheck helps you mange the rest of
your income better, as well as teaches you how to budget better.
The next step in saving is to only use you credit in an
emergency, or when it is absolutely necessary. The problem with credit
cards is that you use them when you don't have the money, so why would
you spend what you know you can't afford? Try to use your savings
account whenever you make a purchase. Even though it may take longer to
save up the money, in the end you will not have to pay the high
interest rates of credit cards and you will save even more money.
The easiest way, and probably the least known way to a large
amount of money, is only if you receive a paycheck every two weeks. If
you take a closer look, you will realize that you receive two extra
paychecks a year. For example, if you make $2000 per paycheck, you can
plan ahead and determine which bills go to each paycheck, and you can
find out which months have extra paychecks. Therefore, you have an
extra $4000 a year to put into your savings.
