Saving can seem hard, especially if your earnings and outgoings are finely balanced. Yet making small cuts to your spendings can lead to huge savings in the long run. It takes an effort to get started, but once you get into the routine it’s actually pretty easy to put money away. The first step is to make the cuts, then you need to put it away. You could also consider low-risk investments as a way to grow savings funds.
Cutting Back On Spending
If you are already saving amounts that you are happy with, then you might not want or need to cut back on spending. That’s fine, but still, it helps to avoid pointless purchases. It’s better to save money than to waste it, whatever situation you are in.
If you are struggling to save then there are a few simple cutbacks you can make to get you on your way. Some of them can feel like massive sacrifices at first, but after a while you won’t even miss them. Frugal living is not so much about plans and budgets, but about spending less:
Switch Energy Providers – It’s not that much effort to switch energy providers, and doing so could save you hundreds of dollars. Use top comparison sites like MoneySuperMarket to figure out the optimal tariff and lowest price. You should switch every year to keep up-to-date with the best companies.
Shop Wise – Shop around when you make major purchases in order to get the best deal or wait for exceptional special offers. Avoid expensive brands at the supermarket. Instead, choose fresh foods and cooking if possible. Never shop on an empty stomach… you will probably buy more than you need!
Coffee Cutback – The ‘Costa’ effect is very real. One coffee a day from a high-street chain costs a few dollars. Two a day costs over $5. Putting away $5 a day instead of having a coffee on-the-go would lead to savings of around $1825 over the course of the year. This one cut could be all you need to save, but apply this mentality to other purchases and you will find even more opportunities. You could take sandwiches to work instead of buying lunch every day, or take a bus instead of a taxi when you head out to town.
Membership Fees – We all sign up to stuff on a monthly or yearly basis, whether it be Netflix, gym memberships or magazines. Ask yourself whether you really need these subscriptions and whether they truly bring any value to your life. If not, then stop them immediately to make more savings.
The money you save by making these cuts should be put into a separate savings account. If you have debt then you should deal with this first. Pay off your highest interest debts, and then keep moving through until all of your debt is paid off. Then you can start saving without looming repayment dates and interest rates.
There are many different approaches for working out how much you should send over to your savings account. One way is to figure out how much disposable income you have after paying all of your predictable expenditures like rent and bills. Use a percentage of your disposable income for your own entertainment and send a good chunk of it into savings each month.
Don’t worry too much about the amount you are putting away. It will be relative to what you can afford. The point is to actually put away a small amount each month. After a few years, you will have savings beyond your imagination.
Think about it this way – if you can save away $100 a month you will have $1,200 by the end of the year. If you put away $100 a week, you can save $5,200 a year, which is a massive amount of savings if you can keep it up for many years.
The problem with savings accounts at the moment, is that interest rates aren’t very high. They can be as low as 0% in some cases, and rarely creep above 1%. This could change, and even 1% will accumulate extra funds in interest over time, but really low-stakes investments in opportunities other than banks remain favorable.
It’s wise to be frugal about your investments. Take the example of Chris Moneymaker, who started small and made $2.5 million playing poker, and is now running a US tour with the same buy-in. Richard Branson, the owner of Virgin, started with just $300 in his pocket. You don’t have to blow thousands to make money.
There are plenty of ways you can invest. You could look at hedge or mutual funds, start your own business venture, or buy bonds and stocks. If you choose to make investments, only use a small amount of your savings account – don’t risk it all!
Hopefully, you can see ways that you can make spending cuts in your own life. Keep doing this for a few years, and I guarantee you will be happy with the results!