A large part of growing up is learning how to manage personal finances. This goes especially for students who suddenly find themselves in charge of their spending, income, and savings. Unfortunately, if they’re not an economics student, a lot of people try to put off the process of learning about finances. This is unfortunate because no matter whether they learn or not, they will still be facing personal finance decisions on a daily basis. If people don’t take the time to look into financial management and make some deliberate choices, then the result is chaotic and even frivolous spending, no savings, and potentially financial catastrophe. They end up in a situation where they don’t know how to start saving and investing money. And trust me, that is not a situation you want to find yourself in. So here are a few strategies on how to start saving money successfully
How to Start Saving Money
The first step in managing your finances is to start taking account of all of your expenses. If you use a credit or debit card a lot, then a lot of your expenses will already be logged in your bank statement. In that case, you should make it a habit to analyse your bank statements at least once a week and see exactly where your money is going. Many people think this step is a waste of time – of course they know very well where their money is going. But, if you are serious about learning how to start saving money, then you should definitely not skip this step. If you do it for only 2-3 months, it will make you much more aware of how much you’re spending and also it will be great preparation for the second step – preparing a monthly budget.
The second step
in learning how to start saving money is to start preparing a monthly budget for the next month at the end of each month. This step should be very easy with the preparation from the first step and the help of some free online tools, like a monthly budget calculator. The monthly budget calculator consists of three main categories (savings, expenses, and income) which have several subcategories. This decomposition of categories makes it easy to fill in all the data and determine whether you are over or under budget.
The main difference between the first and the second step is that in the first step you look at your spending after the fact, while in the second step you do it before the fact. Thus, in the second step you begin to make a much more conscious and deliberate decision about your spending and this is the key to learning how to start saving money. Basically, you are much more likely to actually start saving when you are faced with a blank in your monthly budget month after month where savings or emergency funds are concerned. If you want to start saving some cash, just make the decision to fill in a number in there, and then stick to it!
The second step of learning how to start saving money successfully can also be very useful in making it apparent how much certain expenses are draining your budget. Basically, once you have all your expenses down on paper, it will be obvious whether you are spending too much on certain things. For example, you might see that interest payments on your student debt are taking up a lot of your monthly budget. Then, you could think about whether it would be worth it to significantly cut back on expenses in order to pay off your loans a lot sooner.
If you decide to do that, you should look up some specific advice online on how to reduce expenses in certain categories, such as food, clothing, housing, and similar. Then you could plan next month’s budget with target amounts for each category in the budget, incorporating the cutbacks that would be possible with the strategies you learned online. You could start with categories where you feel there is a lot of space to cut back. For example, if you already have a lot of clothes, then obviously you could easily afford to cut back on new purchases.
While you are learning how to start saving money it is important to be patient and keep a positive attitude. The two most important things for saving money successfully are determination and consistency. Even with these helpful steps, you still might find it a challenging process in the beginning, especially when it comes to analyzing loans, insurance and taxes. While handling these takes up a lot of effort and nerves, it will make you develop very useful tools that you could apply to many areas of your life. For one thing, you could also teach your friends and eventually your kids how to start saving money successfully.