I was having a cup of coffee with my brother last week, and I let him know of my latest ideas on how to save money. He laughed, a deep laugh right from the belly. When he finally pulled himself together, he told me that it was impossible. He claimed that he was living paycheck to paycheck, had tried to cut back, and there was nothing left over for savings. As far as he was concerned, saving was for people who had ‘extra money.’
That got me thinking about saving when it seems impossible. Here are some tips I believe will change his mind, and also help anyone who has been struggling with getting started on saving.
It may seem that you are already cutting back. Frugality requires you to cut back extensively on your spending. Do you have the latest iPhone or game console? Do you ‘treat’ yourself to a fine dining dinner because you work so hard? Or maybe your weakness is a good bottle of wine to help you wind down at the end of the day?
Being frugal means cutting out all unnecessary expenses. Go back to using a basic phone, learn how to cook, and only drink a bottle of wine on special occasions. You will find that you have several ‘extra’ dollars in your account at the end of the month.
When you receive your paycheck, you should save first and then spend. The amount that you choose to save should not make up a part of your income. Mentally, you should let it go. Start small. Open a savings account that has no minimum balance or other fees. You will be saving a little bit each month. Save at least 10 dollars the first month. Increase your savings by 5 dollars every two months.
When you have a little extra, add on to this amount. If left untouched, you can build yourself a sizeable nest egg.
Say no to rewards
Most people have a self-imposedreward system for when they reach a goal. Perhaps you have managed to save 500 dollars. You then choose to reward your efforts by having a 100 dollar dinner. Your savings fund is money that should never be spent – unless you have an emergency or have reached retirement.
Grow your savings
If you follow the advice above, after a while you will see a good amount of money in your account. When you get to around $5000, consider growing your money through investment. Keep half the money in your savings account, and use the other half to start saving in mutual funds or build up a stock portfolio. This should give you a greater return than saving in your bank, which should grow your savings faster.
Whether you have a high or low income, it is likely that you will be living paycheck to paycheck. You can still save, as long as you have the right mindset. Nothing is impossible.