One of the biggest problems people encounter when it comes to saving money is that they just can’t seem to figure out how to save more money. Very few people are actually saving the maximum amount they can. There is usually wiggle room somewhere in their budget. Many people aren’t properly tracking where their money is going, so they don’t realize how much they are spending in areas that aren’t important to them.
Sometimes, you just need to review your finances in a different way to figure out how to start saving more money.
Use These 3 Strategies to Help You Boost Your Savings:
1. The Fastest Way to Increase Your Savings
If you don’t feel like going through your bank account line by line, the fastest way to increase your savings is to start at the end. This method forces you to make choices on where you’re spending your money.
Let’s say you’re saving $100 a week. You’d like to save more, but you aren’t sure exactly how much more you can save.
Set up an automatic transfer at the beginning of each week to move money into your savings or investment account (you can also do this monthly, but I think it’s easier to maintain smaller amounts on a weekly basis). If you are currently saving $100 a week, increase the auto-transfer to $125 a week. After a month, if you realize that there hasn’t been much of a change in your lifestyle and you haven’t had to cut back on things that you love and enjoy, then increase it another $25 a week. (For more, see: Why Saving Money is Important.)
Keep repeating this process until you start to notice a squeeze in your budget.
At this point you will have to answer questions like, “Should I buy the new stereo speakers that I’ve been thinking about, or should I go out to dinner a couple more times this week with my buddies?”
These are good questions to have to ask yourself because not only do they force you to think about your spending habits, they force you to consider what you truly value. (For related reading, see: 3 Ways Debt Holds You Back from Life Goals.)
2. Use the “Bucketing” Strategy
Another way to save money is to use a strategy called “bucketing.”
The concept is to set aside specific amounts of money you want to spend in different categories, or “buckets.” When you hit the amount you set aside for each category, you have to stop spending money in that category.
The first step in this strategy is to decide how much you want to spend in each area of your life. Think about how much you want to put toward each category and set that amount aside in different accounts (your buckets), or even use an old-fashioned envelope system.
Potential Categories:
- Emergency Fund
- Retirement
- Real Estate Purchase
- Vacation
- Dinners
- Entertainment
Once the money has run out, you can’t spend any more on that activity. If you allocated $300 a month to going out to dinner with friends, once you hit that number, there are no more dinners until the following month. (For more, see: Easy Steps to Start Paying Down Your Debt.)
3. Necessary and Unnecessary Spending
In this strategy, you dive into your spending habits and review where your money is being spent over a long period of time, usually a minimum of three to six months. Break these findings down into categories to see how much money is being spent in different areas. Then, break it down further into what is necessary and unnecessary spending.
Once you have it broken up into categories, you will start to see where all of your money is going. The results are often surprising for most. Many people will see at least one to two areas where they are spending much more than they thought.
At this point you can start to pick the areas that you can cut out. You can then take some of that money and put it toward areas you have been meaning to increase, such as retirement, buying a home, or even vacation or going out with friends.
The whole point is to shift your spending away from low-priority areas and toward high-priority areas.
Each of these saving strategies offers a varying level of commitment. Don’t be concerned about how much effort you have to put in. The important thing is to realize that any of them will help you move closer to your goal of saving more money. The best option is the one that you are going to maintain.
