5 Excellent Ways To Save Money

Cushion yourself to keep your peace of mind

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“Saving money isn’t about being able to buy bigger and better things. It’s about being able to take care of your family.” -Dave Ramsey

Getting started with savings can be a mental barrier. Many people believe they won’t have enough money if they put away savings for themselves, that there won’t be enough left over for living. However, you CAN save money and have enough left for your expenses if you focus on doing this the right way. If you develop these healthy money-saving habits, you’ll find yourself not only with enough to live on comfortably, but you’ll also have enough to take care of yourself in the hard times.

Develop these habits now and get yourself out of the living paycheck-to-paycheck lifestyle.

1. Live Well Below Your Means

You’ll never save any money unless you have something to save.

This means controlling your spending and living on less than what you bring home in a paycheck. No matter how much you make, I believe you can always save money. You may have to be very creative, but you can do it.

The best way to do this is to shave enough down on your monthly bills until you have an additional 3% extra of your gross income (yes, you have to do a little math, darn it!). Take that 3% and start funding your savings with it. Then increase to 4%. Keep doing this until you reach 20% of your income to put towards savings. You can always save more than 20%, that would be great! But 20% is the goal towards saving for your cushion and future.

Rich people stay rich by living like they’re broke. Poor people stay poor by living like they’re rich.”

Twenty percent may seem like lofty goal, but it’s the sweet spot where you need to be for the best potential for saving your money. You can take your time to get to this number. It will take a few years. Keep diligent with it and you’ll reap the benefits.

With this extra amount you have left over every month, you can start funding your savings for your future needs.

2. Have At Least Three Different Savings Accounts

Sometimes life hits us hard. It can be a sucker punch to the gut, a left hook to the jaw, or sneaking up from behind and knocking us over the head. This is the way life happens; we have good times and bad times. The bad times can take a toll on our money, from a life threatening event, to the hot water heater giving up the ghost, spilling it’s guts of steaming water all over your floor. And $50.00 in your defunct savings account ain’t gonna cut it.

“The simple fact that is hard to learn is that the time to save money is when you have some.” -Joe Moore

If you think that you’re going to go along in life with nothing bad ever happening to you, you’re living in a fantasy world. Sorry to break it to you. Not only will bad things happen, but they will happen at the most vulnerable times in your life.

And they will cost you money.

Instead of turning a blind eye to this Murphy Law, you need to have a plan for the inevitable that life brings. Whether it’s replacing an appliance, or preparing for the possible loss of a job, to illness and eventual end of life.

This might make you squeamish, so try not to think about it too much, but build up your savings to prepare for life’s curveballs.

1.Retirement Savings Account: This should be started as early in your working life as possible. There are some major bonuses to saving for retirement as early as possible, even as early as your teens and twenties. The biggest bonus is compound savings. The earlier you save, the longer you have for it to make more money on investments and interest. I won’t go into all the mathematics about this, but you’re interested, you can read more about it here. Start with 3% of your income and work up to 20% according to your comfort level.

If you’re in your forties or fifties or even your sixties, remember: It’s never too late to save for retirement. Wherever you are in your life, if you haven’t started saving for retirement, START NOW.

2. Emergency Fund: This savings account is for any small emergencies that come up in life. This is where you draw money from when the appliance goes out, or you have to take your dog to the emergency vet. There should be at least $1K and not more than $5K in this savings account. You don’t have to start with a thousand dollars, you can start with $50.00. Build it up each month until you reach your goal. This will give you a cushion without having to use your credit card and playing catch-up.

3. Catastrophic Life Savings Account: I call this catastrophic life savings, not because it’s all the savings you have in your life, but it’s the savings you use when you have a potential catastrophic event. This is the savings you use for a possible job loss, extended illness, or any time where you can’t earn a living because of one reason or another. This is the “I’m not able to work right now” savings. It can also be used for medical bills that are over your emergency fund, or for major repairs you haven’t anticipated.

You should fund this savings account with at least the equivalent of six months of your take-home pay. This can also be built up slowly over time. It’s best to start early with this account, before you have a family or get older and may need to use for any sort of work leave you may need. But even if you’ve started late, please start. It’s never to late to start. Within ten years, you’ll find you have several thousand dollars at your disposal to stay financially safer if anything should ever happen to you.

“Someone is sitting in the shade today because someone planted a tree a long time ago.” — Warren Buffett

There are infinite ways you can plan and save. You can tuck money away for a down payment on a new car or a house. You can get a savings account to save for a vacation. You can put money aside ahead of time for major spending holidays and birthdays. These are all many different kinds of savings accounts you can develop for yourself. Fund them on a monthly basis to cover events that go above and beyond your spending budget. Only draw from it when you have to pay for something outside of your budget towards gift giving, holidays, vacations or that down payment. It’s a great way to measure and save for those special times you want to celebrate life.

You can even tuck money away for “just because”. You know the change jars in the house? You can have one of these. I also have a paper change jar. Any extra dollar bills I have, I’ll stick them in a money jar. I like it because if I have to pay cash for something that I didn’t expect, I can take from my paper change jar.

3. Automatically Withdraw Your Savings

It’s hard to save money. You see the glorious paycheck and think of all the things you want and need. And why shouldn’t you have them? You’ve worked hard, you’re an adult, and you deserve it.

Before you know it, you’ve spent your entire paycheck and waiting for your next one. This living paycheck to paycheck existence is a scary and dangerous position to put yourself in, because you’re always one paycheck from living in poverty, which can happen with one major life event.

That’s a Russian Roulette you shouldn’t place yourself in…ever.

Believe it or not, you can have the things you need and still save a cushion of money. In fact, you probably won’t miss the money if you do it right.

The best way to save your money is to have it automatically taken out and transfered to your savings and retirement accounts before you get your paycheck.

“Do not save what is left after spending; instead spend what is left after saving.” -Warren Buffett

If you work for a company, retirement funding is usually pretty easy. And many companies will match a small percentage if you contribute to a retirement fund. If you take out your money and automatically have it placed in retirement and savings accounts before your paycheck reaches you, you most likely won’t even miss it.

It’s never too early to think about retirement. Start early and stay ahead of the game. I’m not a financial advisor, but if you fund a 401(k) or another type of retirement before your taxes are taken out, you will miss it even less, because you’ll be taxed on less money.

Having your savings automatically deducted is a double bonus, when you pay less in taxes and have your employer matching your retirement savings. That’s like getting money for free. Seriously, this is something you should be taking advantage of while you’re working.

4. Don’t You Dare Touch That Savings!

When you deposit money into your savings account, fuggedaboudit. Don’t touch it. You can even choose a savings account that makes it difficult to access, if you need more discipline. The last thing you want to do is continue to take from your savings account to cover for your overspending.

If you’re pulling money from your savings account on a monthly basis to cover your expenses, you need to take a hard look at where you’re spending your money. The point is to have the money saved for adverse events only. The emergency fund is for EMERGENCIES. Your catastrophic savings account is only for a CATASTROPHIC LIFE EVENT. And retirement is only used for RETIREMENT.

I may sound redundant, but I’ve had friends pull money out of their retirement fund to pay for minor life events (like getting themselves in too much debt), only to be harshly penalized in taxes and fees. They are NEVER going to recover that money, and it will take decades to build it back up. That’s a hard set-back. You should never place yourself in a situation where you have to pull from your retirement, unless you’re in retirement or at end-of-life.

“Save money and money will save you.”

The entire point of having savings in different forms is to help cushion you in times of desperate need, not to cover yourself if you overspend. If you’re overspending, go back through your spending and figure out where you should cut corners.

5. Replenish Your Savings ASAP

So, the inevitable happened. Your car is in the shop for repairs. Your refrigerator made a high buzzing sound and then let out a big sigh as it took its last breath. You found a leak in the ceiling and now you have to replace the roof. Or worse, you’ve been told that your company is downsizing and you’ve been let go.

You knew that these things were going to happen because…life.

“A small leak will sink a great ship.” -Benjamin Franklin

Hopefully, you’ve seen some of these things already heading your way, and have worked on preparing a Plan B (like looking for another job when you see the red flags in your workplace). But, in case you haven’t, you still have your emergency savings to turn to, to cushion you from the financial hit that comes with the inevitable.

So, you’ve drawn from your emergency savings to pay for that new refrigerator, and you now have $150.00 left in your account. The next thing to do is funnel any extra money back into this account to get it back to your savings goal. Diverting your money may mean doing without some extra frilly stuff that you’ve been used to. That’s okay, because it’s temporary until you’ve padded the savings again. It may also take some time, so be patient.

These methods are not quick fix. Saving money never is a quick fix. It is diligent healthy habits developed over years to put you in a financially safer place. Developing these habits will keep you on top of your financial cash flow. You’ll be in a better place to take care of yourself and your family in times of need. Most importantly, you’ll give yourself a peace of mind and become on your way to financial freedom.

Michelle Birge is a blogger on Medium.com. She writes to inspire people towards personal transformation, and living a passionate life! You can find her blog here.

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Advocate for Women / Editor of The Virago

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