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?