Money, money money! Does anyone else always hear that phrase in the Mamma Mia song tune? Just me?
Anyways, saving money has always been something that my parents have told me is important to do. But it’s never been truly taught to us in school. Recently, there’s been a lot of people online talk more openly about money and how to save. I wanted to do the same and share my process of how I saved over $10,000 this year.
1. Start tracking your expenses
To me, the first step to truly understanding your finances is by tracking your expenses. This way, you’ll be able to see exactly what you’re spending money on and then you can figure out a savings plan. There are many ways to do this, either through automated apps like Mint, or even logging it on paper. I like using a manual logging app called Buddy, since this allows me to be more cognizant when I’m entering each dollar spent. It also makes it a bit easier to log shared expenses like when you split a meal with someone.
I recommend tracking your expenses for about three months to get a good understanding of your average monthly spending. Simply doing this step has made me more aware of what I like to spend money on, and how little purchases tend to add up.
2. Set a goal
Amount
After you’ve gotten a better understanding of you spending habits, that’s when you can begin building your savings plan. Start off by setting a goal of how much you want to save and for what. This will help you be more accountable for your saving and give yourself a milestone to look forward to. The goal can be any amount that you feel is reasonable, based on your current spending habits. Whether it be $10,000, a certain percentage of your current salary, or a certain amount for a specific purchase.
What
Then, think about exactly what you’re saving for. Are you looking to save for a new car, phone or expensive item to purchase? Or do you want to save an amount that will allow you to begin investing? Or do you want to start saving for retirement and to have a certain amount in your retirement accounts? Whatever it is, make sure it’s an actual item, so you can feel like your savings goal is more tangible and real.
Timeframe
Lastly, you want to set a timeframe for your goal. Are you looking to achieve this goal in a year, or 5 years? If it’s more of a long-term goal, break it down into yearly or even monthly goals. This way, you can measure your progress easier and feel the sense of accomplishments when you hit those short-term goals.
3. Change your mindset about saving
This was probably my biggest game changer for me! Before I set goals and determined exactly what I was saving for, saving just felt like I was putting money aside, “just because.” After setting these goals, and beginning to save, I began to see my savings account grow and realize what I could do with my savings. This shifted my mentality from “I’m just going to put some money away because I have extra” to “I want to put money away in my savings so I can do [your goals] later on.”
Once I made that shift, my outlook on saving became almost like a game to me. I started to think about reaching my goal and it was exciting to see my savings account grow. This excitement started to replace the serotonin that I would get from making small purchases like take out meal or fancy coffee. I began to prioritize my savings goals. This changed my perspective on life with a focus on my long-term goals, rather than being zoned in on my short term happiness.
I urge you to work towards changing your mentality about saving the same way. This will motivate you to save, more than just the notion of “saving money.” Rather, you’ll have a more personal motivation, which will guide your success.
4. Budget or check in on your expenses regularly
Many people are told that they need to budget. There are so many ways that you can budget, depending on how you like to plan things out. There are many apps or simple pen and paper methods that may appeal to you.
Some people need more of a strict budget to keep them on track. While others are good at more of what I call, “intuitive spending.” If you feel you need more of a strict budget, start by finding a budgeting method that works for you (trial and error!) and then start building your budget based on your expense tracking. Look at the average that you spend on each category over the past three months. Then build a budget of how much you want to spend on each category that you think that is realistic. With that budget created, take a look at it each time you want to make a purchase to determine if the item will fit within the budget. If it won’t, don’t make the purchase!
I realized that I work best on more of a “check-in method” for myself, rather than a strict budget. I created a budget based on my expense tracking which showed me how much I could realistically put away into savings each month. After completing this monthly budget for myself, I would go through the month and spend with that budget in mind. I don’t force myself to discard an item at the grocery store if I see the bill is higher than my grocery budget for the month. However, I regularly check on my expenses against my budget throughout the month to make sure that I’m staying within my overall “expenses” budget. This method allows me to spend in a less restrictive way, but still keeps me accountable and on track to reach my savings goals.
5. Find small ways to cut back
Once you’ve begun to use your budget in whichever way works best for you, then you can begin to analyze your budget more in-depth. I recommend doing this on a monthly or every other month basis. Reflect on your expenses against your budget during that time period and determine which purchases were the ones that put you over- or under-budget. Review all your purchases and see where you could have chosen not to make a purchase to save a little.
Below are a list of things I did to save money:
- Cooked meals at home when possible
- Bought a cold brew maker to make iced coffee at home instead of going to buy coffee
- Think about the practicality and necessity of a purchase a few times prior to purchasing
- Determine if it’s a want for “right now” or want “for a long time”
- Unsubscribe from retailers’ email lists that I don’t shop at so I’m not tempted by sales
- Think: “Will I use this everyday? Or at least X times a week?”
6. Adjust as necessary!
Last but not least, adjust adjust adjust! This is YOUR budget, and as much as I or other personal finance people can tell you on the Internet, this is ultimately up to you! Your budget is meant to serve you. If you see that you budgeting system is not working and you’re constantly going over-budget, feel free to look into a new method. If you see that your category budgets are not aligned with your spending, change them!
Ultimately, these are tips that helped me make saving money a priority, and I hope they can help you too. Feel free to let me know if these tips helped you in the comments, on Instagram DMs or through email!
