We’ve talked recently about both the benefits of paying off debt as well as reasons why saving money at all is really really hard. Basically, our lives are more expensive than they have ever been before.
That doesn’t mean, though, that you just have to accept debt as a way of life or that you can’t build up a savings (or even a retirement) account. You just have to be proactive about it and sometimes, sorry to say, that means making a few sacrifices.
Here are some of the most practical ways that you can start saving money on your expenses, paying down your debts and building up your savings all at the same time.
1. Create New “Minimums Due”
You’ve undoubtedly seen this tip on other sites. That’s because it works. That “minimum payment due” you see on your credit card statements or loan statements is designed to drag out the repayment of those debts as long as possible to maximize the amount of money you pay in interest to the creditor.
Here’s the formula for your new minimum amount due:
[Stated Minimum Amount Due] + [Amount of Interest Charged Last Statement] + [at least 10% of minimum due + interest sum or 3% of your total balance due, whichever is easier for you to afford right now]
This way you pay off the interest you’ve been charged as well as paying down your balance. You’ll be amazed at how quickly your debt reduces if you create these new minimum amounts due.
PRO TIP: As you pay off debts, take whatever your new minimum payment is and then split it in half. 50% gets redistributed across existing debts. 50% is tucked away into your savings account.
2. Round Up Your Monthlies
How much do you pay each month in subscription fees, utility fees, cable/phone fees? Take the highest amount you’ve paid for each of those bills over the last twelve months and then round that number up to the nearest 50 or 100. That number is the amount of money you budget for the bill every month. Then, when the amount you’ve budgeted is more than you actually owe in a given month, tuck the remainder of what you’ve budgeted into your savings.
3. Make Sure Savings is In Your Budget
Your budget should include a line item for each of the following types of savings:
- Emergency fund
- Regular savings account
- Retirement account
4. Learn How Coupons and Coupon Codes Actually Work
Stores will often offer customers a “sale price” or a coupon for X off but the price after those savings doesn’t feel like it is much lower than you’ve been paying all along. This is because the store is trying to cover up an incremental price increase. This doesn’t mean that you can’t still get great deals via coupons, sales and discount codes. It just means that you have to do a little bit more research and make sure that the deals you find are actually good deals.
5. Let’s Talk About Cooking
The real way to save money by cooking your own food and packing your own lunch (instead of going out to eat) is by buying your ingredients in bulk. And the best way to make bulk buying worth your while is to only bulk buy the things you know you will actually use or to go in on bulk purchases with friends.
The truth is that there are lots of creative ways to save money but you have to be honest about your existing lifestyle and priorities first and what your budget priorities are. If you’ve never created a budget before, there are personal finance website that offer great advice and tools such as Bankrate, BankingSense, and Mint.
While you’re working on your budget, budget according to what your priorities actually are, not what you think they should be. If going to the movies is your very favorite thing in the whole world then you shouldn’t force yourself to only check out movies from the library. Instead, maybe reduce the amount of money you spend going to restaurants or on clothing each month to create space for the things you love most. Good luck!
photo courtesy of alamosbasement