I can remember the first time I thought about my savings as a Good Adult™. I was drinking with some of my work friends during my early college career and everyone was talking about what they were saving now. I have almost nothing to contribute to the conversation because I’m not saving money for anything, just going afloat until I have to pay again. I went home that day and Googled “How to start saving money.” If that’s you now, you’re in the right place.
Building an emergency fund is often talked about as the first thing anyone needs when putting their money together, but what do you do if you have zero dollars in savings early on? Does an emergency fund seem like a flashy thing? I was in that situation a few years after college, and although it was scary at first, once I started taking a few baby steps in the right direction, it was easy to build a safety net. better. If you’re at square one in your financial journey, don’t panic. You have a lot of time and I promise it’s easier than it looks! Check out the steps below for details on how to start saving today.
1. Review your expenses
Most budget writers will jump right into the importance of having a budget, but it’s hard to create a budget that will work if you don’t know where your money is currently going. . Stop by for an evening and pick up your favorite food, then print out the last six months of credit card and bank statements to find some savings. If it’s something that brings you great joy (say, coffee every day or your health club), make a note to include it in your budget. Focus on those bills you don’t remember making (regular subscriptions, looking at you) or know you’re not interested in (those happy hour drinks, maybe?). Those areas are great places to carefully cut back to generate more money to save.
It is important to know that where you live and your current lifestyle will play a big role in how much money you will save. If you work as a freelancer in NYC, you may not be able to shell out thousands a month due to the cost of living in the big city and your current income. While I won’t tell you to move in with your parents and completely change your lifestyle, it’s worth mentioning that your big expenses (rent, transportation, food, etc.) might be worth reconsidering if you want to change how much you can save on it. short term.
2. Think about what you are saving for
When it comes to money, I always need to have a goal otherwise I get completely distracted and spend my money on random things. Whether it’s setting a goal for how much money you want to save over a period of time or a goal for what you’ll use that money for, creating clear goals for yourself will make it easier to stay on track. . When you ask yourself if you want something (see step 4!), you can put in the goal you are saving for as something else. For example, “I want to go to a gym that charges $35 per class, or do I want to be $35 closer to my goal of going to the south of France?”. It’s much easier to choose to save money when you have clear options to motivate you.
The second part of setting goals is making sure they are seen! Whether it’s a vision board on your desktop (my favorite) or on your phone, or an old-school operator where you shoot at the bar every time you hit a new number and your account, keeping your security goals in mind is key. to make them happen.
3. Create a budget
Once you’ve figured out what you enjoy spending your money on and why you’re saving, you can move on to creating a budget. There are many different methods you can choose from, such as the 50-30-20 formula or using specific budgeting tools, but the goal is to find out what your expenses are (such as rent and transportation to work work) and your changing expenses (things like groceries, activities, dining, and health) so you can find a place to save. Based on what you defined as important in the first step, you can determine which variable costs should be added to your budget and which should be reduced. When you remove some areas, set aside the money for storage.
On the other hand, if you know you need to save some money, work backwards to figure out what you need to reduce or cut from your budget to be able to reach that goal. While budgeting isn’t fun, it’s worth remembering that it’s an investment in you and a principle to help you achieve your goals.
4. Start small
When you’re starting with zero, it can be easy to feel like you’ll be saving hundreds or thousands a month to make a living, but that’s not true. By starting small and finding a place to save $5 here and $25 there, you can build momentum that will quickly add up to a lot of money. One trick I used when I started my financial journey (and still use today!) was asking myself if I really wanted something or if it was just a temporary desire. Do I need to buy a fancy salad when I bring my (not so tasty) lunch leftovers? No, I can save that money for something else that I would be grateful for. Do I need another magazine subscription? Perhaps not. You get the point, but asking this question will force you to pause in small purchases and really think if you need something or if it’s better to save your money in the long run.
5. Use automatic security tools
Once you’ve worked out your budget and goals, you can now move on to actually saving money. I like to create separate savings accounts for each goal (look for the advanced savings account!) and rename them to that goal, such as “future house down payment” but it’s “vacation money.” I then went back to my budget and figured out how much I could spend on each goal. Let’s say you have $500 a month to invest. You can put $200 into an emergency fund, $150 into a savings account, $50 toward “other wedding expenses” (not fun, but necessary), and $100 toward your dream vacation. Once you know how much money you want to move to each account each month, you can set up an automatic transfer that will pull the money each month. By having everything automated, you eliminate the need to constantly think about saving because it happens in the background.
One thing to keep in mind with automatic savings is that you don’t set them up before you know your budget is working. Test your budget drive for a few weeks before making any changes to prevent insufficient funds (which can happen, for example, when you spend $50 on coffee a month but spend $80 on though, then you’re $30 short for your auto transfer. ). Be sure to also set your withdrawal to be a day or two after your payment, in case there is a problem with your payment for any reason.
6. Increase your income
Although all of the above tips are very important starting blocks, they focus on the cost-effectiveness side of things. If you have done all of the above but want to reach your savings goal faster, it may be time to consider finding other sources of income or increasing your salary. This can be a temporary increase in working hours until your emergency fund is settled or it can be a long-term game, such as creating a list of freelancers for work that goes on. face or ask for that. . I chose to pick up some writing and editing projects to help me save for my goals when I was a new grad and I could beat my target save number quickly. It helped me get started quickly and once my bank account started to grow, I was able to have more confidence to achieve my goals. This can also be an easy way to call where your money is going – for me, if it comes from my work, it goes straight into savings.