Saving Money
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Saving Money
To save money you just have to spend less than you earn. Knowing the difference between needs and wants is fundamental to doing this; you'll save money if you don't mistake your wants for your needs. Needs are the essentials directly related to your accommodation, food, clothing and transportation; whereas, wants are things that enhance your life but that are not essential for living.
Needs can become wants if you spend excessively on them e.g. spending $10 on lunch when you can buy it for $5, or buying a $60 shirt when a $20 one is satisfactory. It’s not necessary to ignore all wants but they should only be considered when all needs have been paid for. Remind yourself that each dollar spent puts you a dollar further away from what you’re saving for.
Budgeting is essential for saving money; you must to do more than simply saving whatever is left in your current account at the end of the month. Use a weekly budget, as opposed to a monthly one, so that targets and figures are always fresh in your mind, and use a computer spreadsheet program to keep it accurate and up-to-date.
Suggested categories for breaking your budget into: accommodation; utility bills; food; transport; entertainment; clothing; medical; debt re-payments; savings; miscellaneous. Start off with a general budget then, as the weeks go by and you become more aware of your needs, wants and spending habits, make it more specific.
Set savings targets and write them down (making sure that they’re specific, measurable and realistic); if they're unrealistic, you’ll overspend, become discouraged, and won’t reach your money saving potential. Set-up an automatic withdrawal from your current account for just after you get paid and have it transferred into a separate savings account (ideally one that requires a weeks notice before you withdraw money from it).
It’s often not the big purchases that prevent saving money but rather the total of the minor purchases; you can save by making small changes to your existing habits. When totalled for a year, buying coffees, sandwiches, chocolate bars, cigarettes, cans / bottles of drinks, alcoholic drinks, fast food meals, newspapers and magazines.
Avoid making impulse buys by only going shopping when you actually need to buy something i.e. don’t browse around the shops / go window shopping. Never enter a store without setting a predetermined spending limit and don’t insist on having the biggest or the best; upsizing or upgrading being the main cause of people’s financial trouble.
Make all purchasing decisions at home; only going into shops with a list of specific things to buy. Don’t buy anything not on your shopping list for at least a week after first seeing it; if you still want it after a few days then place it on next weeks shopping list and buy it then.
Shopping for unnecessary / overpriced clothes is often a main cause of failing to save money. Avoid clothing trends and fads;they’re expensive (demand inflating the true value of an item) and offer poor value (items soon becoming outdated and un-wearable). Also, remember that items on sale are not necessarily good value; they may have been overpriced before the discount was applied.
Don't overlook the savings that can be made on food; saving a few cents per item makes a big difference on spending when totaled over a week. Research has shown that there can be as much as 10-15% difference on identical food shopping trips at 2 different supermarkets in the same local area, so, do a weekly food shopping trip at each one in your local area and compare the spending total of each. Experiment with using generic shop own-brand food rather than branded versions; often there is little or no difference in quality.
Cinemas, shows, concerts and sports matches don’t represent good value for money; the entertainment being disproportionate to the expense and duration. Recreational activities such as sports, swimming, hiking and amateur dramatics, are cheap to participate in and / or entertain for long periods of time. Make use of local libraries; as well as books, they also offer newspapers, magazines, CD / DVD rental and internet facilities.
Buying / booking anything over the internet normally results in lower prices; companies wanting to encourage people to do so to reduce their own costs. The price difference between buying something new or buying something used is normally at least 30% so, before buying something new, search on an internet auction website, such as eBay.
Questions to ask before any $20+ purchases: Do I need this or do I want this? How many times will I use this a week? How many hours did I have to work to pay for this? Will I still be using this regularly in 3 months? Can I borrow this from anyone? Before making any purchases of over $20, use a price comparison website to find out how much different shops, both high street and online, are charging for it.
Links
www.frugalliving.about.com : Money management. Household and food savings. Shopping for bargains.
www.simpledebtfreeliving.com : Money saving tips. Budgeting. Debt management.
www.mahalo.com : General money saving information. How to make a budget.
www.bbc.co.uk : How to save money. Money saving ideas, tips and advice.
www.creditaction.org.uk : Practical money saving ideas.