The Art of Saving: How to Begin
The economy has pressured many people into finding ways to stretch their budgets to their utmost limits. Some individuals have become so adept at penny pinching that they are able to reduce their monthly expenses by an astonishing amount. For them, saving has been elevated to an art, and though beginners might have trouble achieving similar financial feats at first, the art of saving is something that one can master with enough time and effort.
1. Develop a budget.
A budget is not only a great way to track your daily expenses, but it is also crucial for setting savings goals, such as the purchase of a new home or establishing a college fund for your children. Fortunately, budgeting is simple enough that you don’t have to take any finance or accounting classes to do it successfully, though obviously any experience you have in these areas will make this process easier.
Planning a budget is a lot like dieting; you want to record your spending habits as well as set limits on what kinds of purchases you can make for each category. First of all, trim the “empty calories” from your expenses, like those pricey restaurant meals, impulse purchases at the electronics store and any services that you don’t use enough to justify continuing. Secondly, record every purchase like you would with a food journal to see where a cut can be made. That $4.00 coffee you buy each day before traveling to work might not seem like much, but it adds up to nearly $1500 a year, which can be better spent on achieving one of your savings goals.
2. Manage your accounts.
Knowing where your money is going is not enough, since part of what keeps people in debt is their inability to resist temptation. Having tighter controls on your bank accounts, then, can help you resist the urge to spend outside your means. One easy way to do this is to use cash for smaller purchase to prevent you from racking up those credit card bills. Another principle taught in basic online accounting courses is to maintain separate accounts. For instance, if you want to save for your dream vacation, you should open up a separate bank account specifically for that purpose to prevent you from easily dipping into those savings.
3. Learn the art of coupon clipping.
Perhaps you have witnessed your mother perform the weekly ritual of clipping coupons from the Sunday newspaper. While this may seem like an anachronism in today’s digital era, the art of coupon clipping remains one of the most useful ways to cut your food expenses significantly. The Internet is also becoming a haven for coupon lovers with sites such as www.coupons.com, though the Sunday paper is still the source for about 80% of all grocery coupons. Be careful with some deals such as those offered from buying in bulk since you need to first figure out how quickly you will be able to go through those purchases. After all, you aren’t saving any money if half your groceries are rotting in the garbage.
4. Buy secondhand whenever possible.
When you consider how many useful items get tossed into the trash or end up in a dusty box at garage sales, it’s not difficult to believe that Americans live in a throwaway culture. Although it’s never a good idea to purchase items you don’t need simply because you found a great deal, buying secondhand can really help you make the most out of your budget. Think, for instance, about all the guitars that people buy on a whim and never end up playing, or the aquariums they used for only a year or two. Instead of buying new, why not take advantage of other people’s impulse purchases?
Not all secondhand deals are worth buying, however, because they pose health risks or can become a money pit that undermines any savings you make. Used mattresses, for instance, not only may carry allergy-causing dust mites but they can also harbor bed bugs that are extremely difficult to remove from your home. Used boats also make poor investments since they are not maintained as regularly as cars and can be pretty expensive to repair if there is hull damage. You should perform research first before purchasing secondhand.
5. Learn how to invest.
Wealthy people don’t just save money – they invest it. After all, why put money in a shoebox where it can do nothing when you can put it in a savings account and receive interest? This is why financial experts recommend investing as early as possible. Let’s say you receive a gift of $10,000 after graduating from college. If you put this money into a savings account with interest compounded annually at 6%, you will more than triple your investment by the time you reach the age of 40. Investing in the stock market is also something that any adult can do, though it’s important to invest in companies that you know when you are first building your portfolio.
As you can see, the art of saving is easy to understand but can be quite complicated once you consider all the ways it can be done. With enough practice, however, you can become the financial guru that everyone looks up to.
Brandi Tolleson is a prolific freelance writer and a licensed tax preparer from Los Angeles, CA.