We all would like to have more money, right?
Well, maybe all is a strong word. Some people are totally content with what they have, and don’t think they need more. However, most of us fall into that first group. We would like to have more money!
Here are 5 steps for increasing your savings:
- Discern wants from needs. Figure out what you truly need, and distinguish these needs from what you want. Do you need a car? That’s probably the case, for most us. Do you need a new car that costs $35,000? No. You could always buy a lesser brand that’s still reliable, and pay $20,000, for example. Or, better yet, spend even less on a quality used car. The brand name is a want. The ability to safely get from Point A to Point B is a need.
- Track your expenses. Instead of spending indiscriminately, track your expenses. If you track cash outflow down to the penny, you can get a really good idea of where your money is really going. This can help you figure out where you can cut the fat, so to speak.
- Live within your means. OK, if you follow Step #2 above, you know how much you’re spending and on what you’re spending, right? Now you need to make sure that this fits within your income. Most people have a much better idea of what they earn than what they spend, it seems. If you have both pieces of information, you can make sure that you’re spending responsibly.
- Maintain a gap between income and expenses. Once we’re able to live within our means, we can take steps to make sure that there’s a gap between our income and expenses that results in savings. Of course this means income exceeds expenses, not the other way around:) Many people say 10% is a good figure, but I think that is way short for most people. Working up to 25% or more is more realistic, in my opinion, for today’s reality of a self-funded retirement.
- Preserve and grow income. Thus far we’ve focused on keeping control of expenses. That’s certainly important. That being said, we need to actually have money to save, before we can work on saving it! Let’s not take for granted the cash inflow part of the equation. Working to maintain income first, and then working to increase income, are vital to our overall financial situation. Doing this, while keeping expenses under control as detailed in Steps #1 to #4, can supercharge our savings efforts.
The net result of increased savings is more money in our bank accounts. From there, we can choose the best accounts for our needs. Ultimately, taking the money in these accounts and investing intelligently with a good rate of return (and time on ours side), we can work toward a bright financial future.
My Questions for You:
What steps have you taken to increase your savings?
Where do these steps above fit into your savings efforts?
I haven’t been ‘saving’ as much as I have been focusing on getting rid of the mortgage.
One thing we have done though is automated more savings. We both max out on our 401k plans. We have 5 percent taken out for stock purchase plans (we get a fantastic deal on company stock, then sell after a year so we aren’t too heavily weighted in company stock). I also have automatic payments taken out to cover different things that happen throughout the year, like sports camp payments, taxes, tuition deposits, etc.
Everyday Tips – it seems like you guys are doing a really good job, making smart decisions and squirreling money away while vanquishing debt.
Our savings started to really increase when we made it automatic. We always pledged to save more money but always found a use for it. Now, it’s an automatic deduction out of our paychecks and not even factored into our budget.
Jana – automatic makes it easier, and is another good step toward increasing savings
I make savings a priority and live on what is left. I am willing to adjust my expenses to meet my objective.
Krantcents – I like that: make savings a priority and live on what’s left.
I’ve been using all of these and heavily cutting expenses to make sure I can afford business school without using student loans. Going forward I’ll only be doing 1-3 since as of right now I don’t have any plans to work during the academic year (I’m considering it though!).
No Debt MBA – It certainly makes sense that we have to approach things based on where we are in life at any point in time. If you’re going to school full-time for an MBA, you can only do so much (as I remember).
We automate our saving with 401k and stock purchase plan like Kris above. After the automation, we are trying to live on one pay check so we can save the other one. Saving and growing income are both equally important.
retirebyforty – living on one check makes sense, just have the discipline to do it up front and things become easy in the case of setbacks. Would be great if couples could actually live on the smaller paycheck! 🙂
We have always saved the max in workplace retirement accounts and put a fair amount in stock index related funds. Long term it’s worked out well… in spite of the volatility of the stock market. good article.
Just want to say I am really enjoying your blog posts.
These are such common sense tips that many people struggle with (I used to struggle with this as well!) I think that if people can start with tracking spending and reducing “wants”, then the next step is portioning out 10-25% if your income to savings. That’s the hard part! Note to self: move to a cheaper city, move to a cheaper city!
Little House – I know what you mean, in terms of some people struggling with those common sense tips. As for moving to a cheaper city, it’s all about tradeoffs, right? Depends how much you value that Southern California weather!
Hello, i read your blog from time to time and i own a similar one and i was
just wondering if you get a lot of spam remarks? If so how do you stop it, any
plugin or anything you can suggest? I get so much lately it’s driving
me crazy so any assistance is very much appreciated.