Simple Tips to Save Money: A Beginner’s Guide
Saving money for a rainy day can seem challenging in today’s society with the costs of goods fluctuating. Your income has to cover living expenses like your house or rent payment, car payment, credit cards, student loans, food, health insurance, and utilities. Not to mention, if you have kids, you will have educational expenses like school supplies, sports equipment, musical instruments, and so on.
Here at Massa Auto Pawn & Sales, we have put together this “Beginner’s Guide” with several simple tips to save money. Should you have an unexpected financial emergency while working toward getting started on saving money, remember, you can get fast cash for vehicles you own by selling them directly to us.
How to Get Started Saving
The best place to start is to make a budget. You will want to list out all of your current bills and expenses. For utilities, that can change, depending on the time of year; use your highest monthly bill for your budgeted amount.
Once you have your list compiled, subtract out your take-home (net) income. To determine your monthly take-home income, multiply your net pay by 52 if you get paid weekly or 26 if you get paid every other week. Then take that amount and divide by 12 to get your monthly take-home income amount.
Next, subtract your total bills and expenses from your monthly net earnings. Any money left over is your discretionary income. This is the “extra” money you have left to go to the movies, go out to eat, and do other things you enjoy each month.
Your objective should be to set aside a portion of your discretionary income into an interest-bearing savings account. For instance, if you have $400 left each month, you should try to save $100 a month. This will still leave you $300 to do some of the things you enjoy while starting to build and establish an emergency fund.
How to Increase Your Discretionary Income
If you find you are struggling after making your budget and do not have any discretionary income left, or want to increase how much you have available each month, there are several things you can do to reduce your monthly expenses.
Your goal is to review your budget and look for any expenses you can reduce or get rid of completely. Here are some ideas to help get you started:
1. Cancel your cable/satellite TV service. The costs for digital streaming services are a fraction of what you are currently paying for cable/satellite TV. Plus, many streaming services offer a free trial period and no early termination fees if you cancel.
2. Use sales ads and coupons at grocery stores. Most grocery stores base their ads on the currently offered coupons you can find online or in the Sunday paper. Get in the habit of only buying what is on sale and using coupons to further reduce your grocery bill. There are plenty of couponing forums online you can research to help you discover even more ways to lower your grocery expenses.
3. Look for Groupon offers in your area. Groupon is another way to save money on the things you buy. You can find a wide assortment of different offers that change on a regular basis, such as buy-one-get-one-free offers or half off purchases from your favorite retailers.
4. Cook and prepare meals at home. It is less expensive for most families to cook and eat at home than dining out or getting fast food several times a week. With tip #2 above, it is possible to make meals for a family of four for under $20 a day or less. Make dining out or getting fast food a “treat” you enjoy once a week or every other week.
5. Pack your lunch for work. It costs less to pack a lunch than to buy food each day. Since you won’t have to leave work to get food, you also reduce your fuel expenses.
6. Combine errands into a single day. You can save money on transportation and fuel expenses by taking care of all of your errands at the same time. Instead of going to the grocery store one day, the dry cleaners on another, and so on, map out the most efficient route to take care of these errands all at the same time.
7. Sell your older car and get a newer fuel-efficient model. You can sell your car to us, here at Massa Auto Pawn & Sales and purchase a newer model used vehicle that gets better gas mileage. Plus, newer models have lower insurance rates, so your car insurance could go down, too!
8. Get new quotes on insurance every renewal period. It never hurts to compare how much you are paying for renters or homeowners insurance and auto insurance with other insurance companies. Sometimes, you will find a lower rate that might save you a few hundreds of dollars or more.
9. Downsize into a smaller home or apartment. If you have excess space in your current home or apartment you never use, it is still costing you money. By downsizing, your monthly rent or mortgage payment will typically be lower. In addition, it costs less to heat and cool smaller homes.
10. Turn the thermostat up or down a few degrees. Setting your thermostat a few degrees higher in the summer and lower in the winter will reduce your heating and cooling costs.
How Much Money Do I Need to Save?
Generally, you want to try to set aside at least 10% of your total net income or at least 25% of your discretionary income, whichever one works best for your current financial situation. Your initial savings goal is to set aside enough money to cover one month’s worth of bills and expenses.
Once you reach this goal, save another month’s worth of bills and repeat. Ideally, your long-term goal is to have enough money saved to cover at least three months’ of expenses. Upon reaching the three-month goal, you will want to keep saving up one month of expenses. Then, use the excess money to start paying down your other long-term debts.
For instance, after setting aside money to cover four months of expenses, use one month’s worth to pay down or pay off credit cards and other long-term loans. As you keep repeating this strategy, eventually, these expenses will be paid off, further increasing your monthly discretionary income.
How to Save Money Quickly
If you want to see your savings and emergency fund grow faster than just setting aside a set amount of money each pay period, there are a few different strategies you can use.
1. Save any wage increases you get. If you get a raise at work, rather than spending it, drop the extra income into your savings.
2. Save a large portion of bonuses. If you get any type of bonus from your employer, like a holiday bonus, you should have about 75% of it for a rainy day.
3. Save all of your tax refund money. For any tax refunds you get each year, put the entire refund directly into savings.
4. Save any other windfalls you receive. If you inherit any money, win a decent amount in the lottery, or receive a huge insurance settlement, make sure to put most, if not all, of this money into your savings account.
5. Get fast cash for vehicles you do not need. Sell any cars, trucks, boats, or other vehicles you do not need or which you can do without to us and put the money into your rainy day fund.
TIP: The key to growing your savings it to always remember to “pay yourself” first before paying any bills and expenses. Get into the habit of doing this each pay period to see your savings slowly grow and increase.
If you experience a setback from an unexpected emergency, try not to get frustrated. Simply continue setting aside money to replenish your savings. In addition, remember, how to budget and save money go hand in hand. The more you stick to your budget, the more you will have to save.
Last, you should review your budget every six months for accuracy and make adjustments as needed. As you pay down long-term debts and cut back on monthly expenses, your budget should change.
We hope our simple steps to save money will help you grow your savings. To check out our latest used car inventories or to find out how much we would pay for your vehicles, please feel free to stop by your nearest Massa Auto Pawn & Sales location or contact us at 720.598.0081 today!