If you have a big expense coming up, such as a much-needed vacation, new car, or down payment on a house, chances are you need to save for it. But saving money is often easier said than done.
Interested in learning a few tips and tricks to start your savings journey? These five tips will help you start taking steps toward achieving your savings goals:
1. Know Your Monthly Budget
Before you can even begin thinking about saving for a big expense, you need to know your monthly income versus expenses. Not only will this help you see where your money is being spent but it will also help you understand how much you can reasonably set aside each month as you work toward your savings goal. Not sure how to go about it? Then consider taking advantage of a free online budgeting calculator to help you wrap your head around this first step.
2. Commit to Cutting Unnecessary Costs
While dining out several times a week or splurging on an expensive cup of coffee every day might seem harmless, when you do the math, these expenses add up quickly over time. In fact, it’s estimated the average American spends about $3,000 annually eating out and the average coffee lover spends between $700 and $1,000 every year on coffee-shop coffee. To help save more money, consider brewing your coffee at home before you leave each morning and committing to bringing your lunch to work most days. These small changes could save you big bucks over time.
3. Start with Small Savings Goals Before Going Big
If you’re fairly new to committing to a savings goal, you might consider starting with smaller and more easily obtainable ones first. Perhaps you can commit to putting $20 a week into savings for the next two months or do a better job of planning out your grocery budget each week. Setting smaller goals will help you get into the habit of saving, as well as let you experience the positive feeling of achieving each goal.
4. Pay Down High-Interest Debts
While it may seem counterintuitive to focus on paying down debts while you’re trying to save for a big expense, the reality is that paying down those debts now will allow you to save more in the future. When a credit card or loan has a high-interest rate, you pay more toward interest than actually making any headway in paying down the debt. And this can really add up over time. As you pay down larger sums of the high-interest debt, you pay less interest and therefore will have more disposable cash to allocate toward saving for a big expense in the future.
5. Restrict Impulse Buying
One of the quickest ways to derail saving for a big expense is impulse buying. For this reason, it’s important to set strict guidelines on your buying habits. For instance, give yourself at least three days to consider a purchase before committing to it. Conversely, you can take advantage of and use a tool like the Monorail app. The app allows you to add items you’re considering buying into the app and then save toward the purchase of each item instead of dipping into your big-expense savings, or worse, acquiring more debt. Setting guidelines for your buying habits upfront will help you save much more in the long run.
Your Savings Goals are Within Reach
Though beginning a savings journey may feel a bit overwhelming at first, the little steps you start taking today will quickly add up over time. By getting familiar with your monthly budget, cutting unnecessary costs, paying down your high-interest debt, and setting spending limits for yourself, it will only be a matter of time before that big expense you’re saving for becomes a reality.