Saving Money: Daily, Monthly, and For the Long Term
According to a study done by the Massachusetts Mutual Life Insurance Company, 71% of Latino-Americans feel like they are running behind when it comes to retirement planning. An FDIC survey, meanwhile, found that 51.1% of Latinos either don’t have a checking account or don’t rely on it. Instead, many Latino-Americans make heavy use of Alternative Financial Services. These services—such as non-bank check cashing services, payday loan services, and even pawn shops—leave Latinos vulnerable to high-interest debt traps.
Whether you are facing these hurdles or not, having a plan in place to save more money is something that can benefit anyone. Here are a few strategies you can use to save money—daily, monthly, and for the long-term:
Every Day
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Use the 48-hour rule: For larger expenses, implement the 48-hour rule. This strategy is helpful to avoid impulse buys. Instead of seeing something you want and buying it, give it 48 hours of consideration. Weigh the pros and cons, look at your budget, let that initial impulse to buy dissipate. If you still think making the purchase is the right choice after 48 hours, go ahead. If not, you just saved yourself money.
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Cut out frivolous expenses: What are your daily vices? For many Americans, the answers are Starbucks and takeout. For you, they might be different. Most people, though, have something they spend money on every day that they don’t necessarily need. Instead of getting Starbucks, you can make coffee at home. Instead of buying takeout, you can cook your own meals. These may seem like small actions, but they can save you a lot of money over time.
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Carry cash: In the age of debit cards, credit cards, and mobile payments, we’re more detached from the money we spend than ever before. Carrying cash can make you more deliberate about the money you spend and cut down on those pesky impulse buys.
Monthly
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Track your spending: Keep a spreadsheet—on your computer, in a Google Doc, or in a personal planner—tracking every dollar and cent you spend. Make notes of where you spent money, what it was for, how you paid (cash, credit card, etc.), and how much you spent. This process will not only help you adhere to a more rigid budget, but it will also help you see where your money is going.
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Pay your credit card bills: If you have a credit card, make a point of paying off the full balance each month. There is arguably nothing you can do that will be more beneficial to your long-term finances. It’s easy to think of a credit card as “free money,” but you are very much responsible for every dollar you spend. Make it a goal to never pay a cent in credit card interest.
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Save a little bit of every paycheck: Try to save a little bit of your paycheck every month. The amount will obviously vary depending on how much you are making and what your expenses are. Ultimately, though, the amount you save is less important than getting into the habit of saving. If you have a checking account, your best bet is to set up regular automatic transfers to a separate savings account. Configure the transfers so they coincide with your paycheck. Merely taking $20 per paycheck and putting it in a different account so you don’t spend it will help you accumulate wealth.
Long Term
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Figure out a budget: Once you’ve tracked a few months of your spending, you should have a pretty good idea of how much you need to spend per month. Use this figure to plot out budgetary goals. Decide how much you want to spend and save per month and stick to it. Your budget will fluctuate from month to month, and you’ll probably go over it once or twice. Regardless, just having that goal in place will change the way to think about money.
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Get your accounts in order: If you are using Alternative Financial Services, consider switching to a more traditional banking service. Checking and savings accounts make it easier to track your money and automate your savings. If you already have banking accounts, move on to retirement accounts. If your employer offers a 401(k) program, learn about it. If not, consider starting an IRA or an investment account. Most experts recommend contributing 10% to 15% of your annual income to a retirement plan.
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Set savings goals: What significant expenses are you planning for down the road? Do you need to buy a new car? Are you saving up to purchase a home? Or do you want to take your family on vacation? Setting savings goals will motivate you to save money and spend money more wisely.
Budgeting: Best Practices to Consider
Of all the money-saving strategies discussed above, setting a budget for yourself may be the most difficult. Between natural month-to-month spending fluctuations and unforeseen expenses, it can be hard to determine what your budget should be. Here are a few best practices to get you started:
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Stop living beyond your means: The biggest part of budgeting is figuring out what you can afford. This step is tricky, because everyone wants to afford the nicest car or the newest phone. However, when money is a little tight, knowing what falls outside of your affordability spectrum can make all the difference. Remember that it’s okay to keep driving an older car, or to keep your cellphone for four or five years instead of one or two.
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Pay off your debt: If you have high-interest debt—student loans, credit card debt, etc.—then your first budgetary responsibility is paying it off. Cut everything but the essentials out of your monthly spending and focus on getting rid of that debt. Otherwise, the interest payments are going to decimate your budget for years to come.
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Don’t spend your windfall; save it: When you get a windfall—be it a raise, a holiday bonus, or a lottery victory—it’s tempting to spend it immediately. Don’t. Instead, save that money, or use it to pay off debt. Sure, there are more fun ways to use the money, but they won’t be as gratifying in the long run.
Finally, don’t be embarrassed to ask for help. Consulting a financial broker can be a terrific way to build a budget and establish smarter money habits across the board.
Sources:
http://www.businessinsider.com/7-smart-money-habits-to-start-right-now-2015-1
https://www.cnbc.com/2016/12/21/11-simple-money-habits-that-will-help-you-build-wealth-in-2017.html