Learn and master useful skills that will allow you to control your daily spending and save money for your dream vacation.
When we think about saving money for a specific purpose, not the funniest thought comes to mind – we need to “tighten the belt”. This idea becomes especially unattractive if at the moment your budget is quite limited, and it seems that there is nothing more to save on. However, you can master the ability to control your budget in any circumstances and the ability to make more correct and organized financial decisions (both large and small).
It is no secret that the growth of well-being is followed by increased needs. It is easy to spend all the earned money, while the money remaining after spending is usually not automatically saved. This means that saving must be approached consciously and purposefully. And the more specific the goal you have, the more likely you will save money for it within a specified time frame.
If you start saving money with the aim of simply saving “a little” for an indefinite period, it will be easier for you to break or bypass the restrictions. But if you set yourself the goal of saving $1,500 in six months so that you can go on a week-long vacation next summer, your destination will become quite real and attractive. Now all that remains is to learn the tips that will allow you to control your budget Woburn without reducing the quality of life!
Set realistic goals
The aforementioned $1,500 for six months is just an example and a call to everyone to set a realistic goal. A realistic amount of savings is an amount that does not seem too easy or too difficult for you to achieve. This is an amount that will help you change your usual spending but will not create discomfort and the feeling that “a step to the right, a step to the left is a firing squad.”
If you set the goal of saving too little amount every month, which could be doubled with a little effort, then you will simply be wasting time (because you could be lying on a beach abroad in three months…) In turn, if you try to save too much every month, then, most likely, someday there will come a moment when everyday needs or something unforeseen interferes with this process, and all good intentions will go to the wind.
What percentage of income should you save each month? Personal finance experts often mention the 50/30/20 principle, according to which 50% of income should be spent on basic needs – food, rent or credit, utility bills and other predictable expenses or your desires; 30% of income can be used to other needs – unforeseen expenses; and finally, it is recommended to convert 20% of the budget into savings.
Of course, a lot depends on the actual amount of money available – if more than 50% of your total income is spent on meeting your monthly basic needs, you will either have to reduce unforeseen expenses or spending on your desires, or save less than 20% of your income. One thing is clear – you will have to reduce spending on your desires! How to do it?
Meet your new best friend – Budget!
As we have already mentioned, in order to make savings, you will have to work with your own way of spending money on unforeseen/impulse spending or spending on your desires, change this spending or reduce it. However, it is impossible to change or reduce anything in this area without knowing what the money was spent on! Often, when it seems to us that today we certainly didn’t buy anything, the bank account shows us that a substantial amount of money has actually been spent! Why is that? In principle, this happens because most of all we spend on small, inconspicuous purchases – a couple of dollars here, a couple of dollars there, and in the end a large amount is collected.
To understand what we are spending money on, we will have to start drawing up a budget – all expenses must be recorded so that there is clarity about the trends in our expenses. Even if you are not familiar with Microsoft Excel, do not worry – nowadays there are various applications for keeping track of personal finances, and you will certainly be able to choose the most suitable one for your needs and capabilities.
Financial applications usually offer to group expenses by thematic groups – “food”, “rent”, “transport”, “gasoline”, “entertainment”, etc., as well as create your own categories depending on your habits. Start using the app – there you will have to mark every expenditure, and this will show you where the money is “going”. Perhaps, in your case, petty expenses will be the main culprits – coffee, buns, chewing gum, sitting in a cafe with friends, or perhaps most of your money is spent on “lucrative” offers during periods of discounts? In any case, before you change your habits, you need to study and understand them!
Food and meals outside the home
While food is undoubtedly one of our basic needs, which earns an inviolable 50% of our monthly income, it is also an expense category that can be a great way to save money. Of course, this is only possible through planning – more planned large purchases with a list of necessary products in hand, more comparison of prices in different stores, and fewer “impulse” purchases.
Obviously, we spend quite a lot of money when we eat, drink and have fun outside of our home. Morning coffee from a nearby cafe, Friday dinner at a restaurant with friends, Saturday night at the club with wine and cocktails… Obviously, activities may vary, but in general, our usual rituals and socialization methods involve spending quite a lot amounts. If you understand that this is also your “strong” category of expenses, introduce changes to it! They should not be unpleasant – in the summer you can go with friends for a walk in the park or to the seaside, and in the cold season you can visit, for example, exhibitions. You can avoid some things, for example, buying hot drinks outside the home, by taking a drink in a thermos from home. By the way, this is also a more nature-friendly solution.
Plan your expenses for the future
There are expenses that are completely seasonal in nature – for example, we can feel it perfectly when the time for Christmas gifts is approaching. Gifts are not the only type of seasonal expenses. They can be very different and individual. If you own a car, then you know very well in what periods the car requires investments – buying new winter tires, annual road tax, potential repairs before a technical inspection, etc.
Likewise, if you have children, then you know very well that every year in August you will have to purchase the necessary items and uniforms for the school. And children are constantly growing… If these and all other seasonal expenses are not planned, they will always lead to a budget deficit, and it will be difficult to save money. But if you use the financial application for a long enough time, then you will study your financial behavior, know large and small expenses and take into account in advance what else you need to save money for.
Traveling is a great motivation to start saving money and a great way to reward yourself for a good job. But if you have already mastered the science of saving, do not stop and save money after you have collected enough funds for the planned trip! During the year, you can always make savings for seasonal spending, but not only for them – the “airbag” will always come in handy, it will be a good help with any large purchase. If you have already saved up a part of the amount for a large purchase but you still need a little financial support, you can always get the required amount by taking a personal loan in Woburn MA.