If you want to be financially successful in life you have to save money and properly manage it.
Saving money is a big problem for most people simply because we love spending every penny we earn. By Saving I don’t mean holding onto every dollar you have let’s just call it spending nothing more than you actually need.
The large majority of people currently have this problem and it’s one of the reasons why so many hard-working smart and talented individuals never become wealthy.
Do you ever look at your bank account and wonder where did all my money go? I’m sure that’s happened to many at some point. So today, I will share with you 9 proven ways to save more money and spend less so you will be sure to see that bank account rise in no time.
And make sure to read until the end as the last step to save money will ensure you take your money management game to the next level.
Why you should save money?
First, you need to understand why you have to save money and this example will explain that:
Let me introduce you to three of my friends Bill, John, and Brandon.
Bill is 25 years old and loves spending money. He’s like most of us. He doesn’t save his money because he has a stable job with a salary of $36,000 after taxes that cover all of his expenses mortgage, car, and the new iPhone he recently bought.
As time goes by, Bill gets married and he becomes a father and again he doesn’t save his money.
Now, instead of covering only his expenses he has to cover his child’s and probably wife’s expenses as well, but his salary only increased by 15% in The Last 5 Years.
So now, he has to cut down his spendings to be able to pay for all the necessary things. As life moves on, his salary keeps increasing but not as much as his expenses.
So after many years, Bill decides to retire but he finds that he hasn’t saved any money for that. So he’s left with no other choice but to keep working
On the other side, John doesn’t want to find himself in the same position as Bill when he reaches his 60’s. So he decides to save 10% of his income hoping that by the time he’s 65 he can stop working and enjoy his life
After 40 years, assuming that his income increased by an average of 3% a year he manages to save $264,385. Obviously, that’s not enough money to travel the world and cover your expenses for the next 20 years or so but at least that’s way much better than Bill.
Now, our third friend Brandon who is also 25 and makes relatively similar income realized that saving 10% of his income is not going to make him financially free anytime soon and if he wants to see any significant difference he would have to wait until he’s 65.
So he decides to take a different approach, instead of saving only 10% of his income he decides to save 25% and instead of simply saving it, he decides to invest it into an investment fund.
Like his two other friends, his income increased by an average of 3%. Assuming that he keeps only investing $9,000 out of his salary, although, that his income is increasing every year in under just ten years his savings grow up to more than $150,000.
He can withdraw that money and start his own business and maybe retire earlier or he can simply keep it in an investment fund and without saving a single penny for the rest of his life that initial Savings of $150,000 will grow up to 4.2 million dollars by the time he retires.
So compared to Bill and John, Brandon will have either retired earlier or will have an amazing retirement.
The conclusion to why you have to save money
What sets Brandon aside from the other two is that he knew if he would sacrifice 10 years of his life now he will be able to leave the rest of his life as he wants.
So the first idea is that you should know exactly why you want to save money in the first place. A lot of people give up and stop saving because they don’t see exactly why they are saving in the first place
Your goal shouldn’t be to save for a great wedding or a brand new car because once you get that car you will go back to your previous position and still faced with financial challenges again.
So the ultimate goal should be to achieve the Financial Freedom.
1. Know your expenses
If you’re not a consistent saver than it might be really difficult to start especially in the first couple of month when you realize that your savings aren’t growing as fast as you would want them to.
So instead, know your expenses first, spend the next 30 days writing down every transaction you make so that by the end of the month you will have a detailed understanding of how exactly you spend your money and you can deduct your expenses in those areas that don’t have a big effect on your life.
For instance, instead of buying a coffee every morning you can make that yourself and save somewhere around $50 to $70 every month, instead of driving use public transport to get to your job if it’s more affordable and you might save another $50 to $60 there, and this way you might save a couple of hundreds of dollars every single month.
2. Employ the 30-day rule
Do you remember when you were a kid and you would write out a wish list for Santa months before Christmas? You would be overwhelmed with excitement as you imagined yourself playing with your new toys but as many months pass the idea of having that new item started to wear off as you realize you didn’t really want it as much as you originally thought. Maybe you ended up seeing other toys that you liked better.
The same principle still works now as we often overspend because we get caught up in the latest trends. We want the newest clothes or have to get the most recent phone but when we act on it on a whim and buy these items we are never really as happy as we thought we would.
I am sure many of us have experienced buying something that we thought we really wanted and ended up not really caring about it a month later, even worst, we end up regretting spending the money.
In order to start saving money and spending less, whenever you have a desire to buy something new you write it down. Then, 30 days later review your wish list and if you still want it and can fit it in your budget then you can buy it.
More often, you will no longer feel as compelled to buy that item, saving you a lot of cash and buyer’s remorse.
3. Look at dollars in terms of hours
You’re at the mall and you see a t-shirt that would look amazing on you. Then, you check the price tag and it’s $50. For many people, buying the t-shirt would be an easy decision as they would not think twice about buying it.
Focusing on how great they will look instead of the cost but what if instead you considered the time investment it would cost you to buy that t-shirt.
Let’s say that you make $10 an hour at your job, a job that you despise going to every single day where one hour feels like 10, can you justify spending 5 soul-sucking hours at work for this t-shirt.
When you start to realize the actual cost of the things you buy you can easily start to avoid unnecessary purchases and stash away more money in your savings account.
4. Write a list before you go shopping and stick to it
It’s a fact that you’re more likely to buy unnecessary items if you’re shopping without a plan.
We’ve all done it before, you get to the store, realize you don’t know what you need and start putting everything into your shopping cart.
Impulse purchases seem harmless in nature but these reactive spreads of spending can add up quickly. In 2018, it was estimated that the average US consumer spends $450 a month on impulse purchases which are over $5,000 a year.
What’s worse is that these impulse purchases are most frequently grocery store items which can prey upon your hunger when you’re running errands on an empty stomach.
So, if you want to avoid frivolous spending make sure that before you leave the house you have a list of all the items you will need to buy so that your shopping trip can be as budget-friendly as possible. Before you spend your hard-earned money carefully plan your shopping list and more importantly stick to it.
5. Only spend cash, this will help you save a lot of money
Well, if you’re really serious about saving money than you should be using cash a lot more often.
In today’s society, most people become accustomed to paying everything on credit cards, which believe it or not, is detrimental to your spending habits.
You see the ease of paying on credit is causing many individuals to overspend. In a 2001 study, MIT researchers found that shoppers spent a 100% more when paying on credit than when they used cash.
Therefore, If you want to spend less and save more money than form a habit of spending only cash as often as possible and leave your credit card at home.
Whenever you want to buy something try to always use cash instead of a debit card. Whether you’re ordering food in a restaurant or getting something from groceries handing over a $20 bill is a lot harder than just swiping your card.
Over time, you will become a more conscious spender and you will buy more of what you need and less of what you want.
6. Cut off your television to save money
This one is pretty simple but very powerful, cut off your television!
What you’re essentially doing when watching television is you’re paying to watch something that was automatically served to you and most of the time you had no intention to watch but on a deeper level you’re spending your time.
Time can be money and when you waste time you waste money so you’re basically paying someone to lose money. I don’t know about you but that is a trade I cannot accept and I haven’t watched TV for the past four or five years.
The benefits of doing this are enormous you’re getting your money back from the monthly subscription you used to pay, less exposure to spend when you see ads, a lower electric bill, and more time to focus on other things in life such as building your business, reading, and learning.
7. Procrastinate to save money
Procrastination is bad but not in this case. Usually, we get excited when we want to buy something right away even if it’s something that we don’t really need but over time that excitement goes away.
It’s like when you buy a new phone in the first couple of days you might still be excited about it but then you know what happened, it just becomes normal, so why not get into the habit of waiting to buy things especially expensive ones.
You will still end up buying all the important things you need but there will be plenty of times when you change your mind and hold onto your cash
8. Commit to paying yourself at least 10% of your paycheck every single month.
Up until this point all the money management tips I’ve shared take effort, you have to consciously operate in cash, right a shopping list, and calculate the hourly cost of your purchases. If you want to make saving money easy set up automatic deductions from your paychecks
This is one of the lessons I’ve learned from the book the richest man in Babylon. He says that wealth starts with saving.
The majority of people work hard and when they get their paycheck they usually pay everyone else but themselves. They pay for the cable TV, pay for clothes they don’t need, they buy a new watch, and by the end of the month, they’re left with nothing.
Instead, pay yourself at least 10% of your income before you spend it on anything else. If it helps you can set up automatic deductions at your bank so every month a percentage of your income will be transferred to a savings account and after a while, you’ll have money that is all yours which you can use to build your side business or safely invest it in stocks.
You’re not allowed to spend this money under any circumstances, no matter what you are going through this money cannot be spent anywhere but only can be invested. Consider it to be part of your taxes, something that you have to pay whether you like it or not.
Therefore, by setting up automatic deductions you’ll be saving your money without any effort at all.
9. Change your mindset from saving more to earning more
It’s easier to save more money if you earn more money.
So instead of focusing on saving as much as possible shift your focus on how you can increase your skills and value so that you earn as much as possible but be careful not to fall into the Trap of spending more just because you earn more
You can read 10 Legit ways to earn money online to get some ideas to work from home and create an extra income, Also, I recommend you read Why you need a side hustle where I talk in detail why you should have an extra income even if you’re financially secure right now.
I’ve seen so many people get a raise that they immediately feel good about and later they spend all the money so, in the end, it’s just the same as if they did not get it in the first place, they’re left with zero.
Don’t be that guy; even if you get a raise or suddenly find yourself with extra money keep your expenditures the same.
So read, grow, and learn as much as you can. Combine that with the tips from this post and I guarantee you, in no time, your savings will start to increase rapidly.
Thanks for your time
This was my approach on how to save money and be financially successful. I hope you liked it and if you did then I recommend you to join my newsletter I post about money management and how to make money. Also, if you know anyone that would benefit from these pieces of information feel free to share with them and spread the knowledge.