Finances are the hardest part of life to get right. They are overwhelming, confusing, and depressing. So how can you work toward better financial health? There is a lot you can do right now to improve your financial health, so long as you’re prepared to make sacrifices along the way. Follow these everyday money-saving tips to better financial health.
Track and Budget
The first step on the road to better financial health is knowing where your money is going. Start by tracking your expenses, either by hand or using one of many services. As you learn what parts of your life you are spending the most on, you work toward changing your spending habits to save more and spend less. There are lots of ways to budget your money. 2 basic ways are 50/30/20 and Cash Envelopes.
The first way is simple, split your monthly income into three parts, necessities, wants, and savings/debt. Then allocate 50% of your income toward paying for necessities like rent, car payments, etc, then 30% to wants, and finally 20% to saving money and paying off your debts. It’s simple but effective math that can help you save in the long run.
The second way is cash envelopes and can actually be used alongside 50/30/20. This is a simpler method that is good for people who tend to overspend with debit cards. Basically, you separate your money into labeled envelopes, then you can see what you spend in cash rather than not seeing anything when you pay with your card. To combine it with 50/30/20, you could get the “wants” money in cash and separate in the various categories you need money for, food, entertainment, etc. then send out the envelopes only to save.
There are many other budgeting styles and formulas out there, spend some serious time looking into them and figuring out which is best for you.
Pay Debts Off
One of the most important steps on the road to better financial help is pretty obvious. Pay off your debts. Large monthly payments can be a huge drain on your income and make it really hard to save. If you’re struggling, focus on paying off your smaller debts first, then tackle the larger ones as you go. This is known as the snowball method, and it helps you to build better financial habits, like paying your debts quickly. If you have a credit card, pay off the card each month before you start accruing a larger mountain of debt which will only be more difficult to rid yourself of. Take it one step at a time and don’t overwhelm yourself with trying to pay off everything at once. As more income is freed by paying off debt, you’ll be free to start saving.
Americans spend a lot of money on groceries, nearly $700 per month. Another important step for financial health is learning how to smartly spend. Before you head out to the grocery store, take your time making an inventory of the foods you already have, and making a menu that utilizes when you already rather than buying pre-made dinners or spending on take-out. When you go grocery shopping, you can use an app to track exactly what you’ll pay, including sales tax, and there are plenty of apps where you can meal, plan, make lists, and keep an inventory of what you already have. Not only will you save, but you’re also likely to cook more and healthier meals than were before.
One of the hardest things to do when you’re trying to save money is cut back on your spending habits. There are a lot of things you can do to help cut spending from shopping and impulse purchases. Eating out every day is no good for your bank account. Try to cut back on daily coffees and McDonald’s runs. If you still want to go out, you can just stick to your budget. Try ordering smaller servings at restaurants, opt for appetizers or split an entree with your dining companion(s) in order to save. If you’re looking for things to do, take advantage of free days at museums and national parks, and look for discounts for seniors, students, military members and more when purchasing tickets for movies, concerts and theme parks.
Another huge bank account breaker is online shopping. Not only is it easy to do, it only takes a few minutes and it barely feels like you’re spending money. For healthy finances, you need to restrict online shopping. Or at least make it more difficult to shop online. Instead of saving your billing information, force yourself to input your shipping address and credit card number each time you order and put a 24 freeze on yourself before actually purchasing anything. This should help limit impulse purchasing.
If you really want something, go the DIY route and make it. So many things can be cheaper when you do them yourself. You can even make affordable gifts like herb gardens and gift baskets. Finally, before making a large purchase of appliances, furniture, electronics, etc., make sure you look during sale season and don’t buy anything hastily. Take your time deciding what will work best for you then wait 24 hours before buying anything to give yourself time to really think over your situation.
Chances are, you’re paying for multiple subscriptions like Netflix, Hulu, Spotify, gym memberships, trendy subscription boxes, and Amazon Prime. Unsubscribe to anything you don’t use regularly, and turn off “auto-renew” when you make a purchase. This way, if you don’t end up using it, you don’t end continually paying for it. Make sure you budget for the cost of subscriptions and know that if you cancel something, you can always resubscribe later if you really need it. Another way to save this is by membership sharing with some family or friends on the subscriptions you do want to keep around. You can trade off who pays or have one person pay Hulu, someone else Netflix, and someone else Amazon Prime, whatever works for you.
Reduce Monthly Bills
Don’t be afraid to look for ways to save on larger expenses as well. Did you know that you can save money on your electric bill just by making a few tweaks to your home? Or that with a few phone calls you can save on the internet? A few ways you can save on your monthly bills include:
- Taking shorter showers (nope, we didn’t say fewer)
- Fixing leaky pipes
- washing your clothes in cold tap water, and
- installing dimmer switches and LED light bulbs
- Save up to buy energy-efficient appliances
- Refinancing your auto loan
- Bundle cable and internet
- Remove Phone Insurance
- Turn the temperature down by 3-5 degrees
- Unplug electronics when they’re not in use
- Get an Income-driven repayment plan for student loans
- Refinance your mortgage
Auto transfer To Savings
A great way to consistently get money into your savings account is using an automated tool or your bank’s online banking features to set up automatic transfers. Digit and Qapital both automatically transfer small amounts from your checking account to a separate savings account. Bank of America does the same each time you swipe your card. You also set up your direct deposit, if you have it, transfer either percentage or amount into savings from each of your paychecks. You can also empty your pockets each day and start collecting extra change. Then take your collection to the bank and put it directly into your savings account instead of your checking account. You also try setting aside five dollar bills for a set amount of time, which can really add up, and deposit the amount into savings when you’re done. Seeing money has cold, hard cash can help remind you that it isn’t just numbers on screen actual currency. Seeing your savings grow in real cash can be a really motivating visual.
Goal setting may seem tedious, but it’s a great way to motivate yourself and stay on track. Think about why you’re saving. Is a wedding on your horizon? Are you getting ready to buy your first home? Keep your ideas in mind to motivate you, then set a specific but realistic goal. To start out, it might be put away $20 a week or $100 a month. Start small and then work your way up toward some more difficult goals. Try to create both short and long term goals that will keep you motivated.
- Short-term (1–3 years)
- Emergency fund
- Down payment for a car
- Long-term (4+ years)
- Down payment for a House
- remodeling project
- Education Fund for Kids
- Retirement Fund
If you’re saving for retirement or your child’s education, consider putting that money into an investment account such as an IRA or 529 plans. While there are risks, they create a lot of opportunity for growth when the market grows, and could be appropriate if you plan for an event far in advance. To keep motivated you can set short-term goals for things you aren’t likely to have the cash on hand to pay for, such as a new smartphone or holiday gifts. Reaching these smaller goals and enjoying the fun reward you’ve saved for can really help keep you motivated to keep on going with your new savings habits.
No matter the state of your financial health, making a few changes can have a lasting impact on your financial situation. Take your time learning as much as you can about budgeting, saving and your finances in order to save your way to a better future.