Let’s face it — you’d feel much more comfortable with a bit more savings in your bank account.
You know you need to start saving. You’re just not sure how to start.
The key is to begin as soon as possible, but — how?
And diving in without a plan can leave you overwhelmed and less likely to work towards your savings goals.
So, if you’re trying to save money, make sure you do this first.
You’ll clarify (1) where you are, (2) where you want to be, and (3) how you’ll get there.
Save More Money by Tracking Your Spending
You’ll save more money when you start tracking your spending.
This is the absolute first step to take if you want to start spending less, and saving more of your money.
Why? You need to know where you stand financially before you can make informed changes.
Do you have a clear idea of where your money is going now?
How much do you spend on groceries each month? When was the last time you checked how much you were spending on monthly subscriptions?
You might not realize exactly how much you’re spending on eating out (hint: it’s probably more than you think).
Your Spending Habits May Surprise You
Take a good look and see how you’re doing overall.
If you’ve never done this, it can be a little scary. But — the head in the sand approach is NOT a smart way to approach your finances.
So, you may experience some short-term stress, but in return you’ll be much more comfortable and confident in your financial wellbeing moving forward.
Once you start digging in, your overall spending habits might come as a surprise to you!
You might think that your biggest expense is your rent, when it’s actually coming from food. Or you may not realize how much a morning latte adds up over time.
It’s not just you though, most people underestimate how much they spend. In fact, 84% of Americans underestimate how much they’re spending on subscriptions each month.
But you can be in that other 16%. All you have to do is track your expenses.
You Can Categorize Expenses by Type
Okay, the scary part is over. Now you’re starting to take control.
Seeing your expenses laid out into different categories is a powerful tool. Once you start categorizing each expense by type, you have a path forward.
Now — you can do this manually, or use some handy budgeting apps that actually do it for you. Your choice.
Having categories you can refer to is super useful when it comes to creating your goals.
Now that you know why tracking your expenses is essential, here’s your plan of action for the first month.
Three Easy Steps to Tracking Your Expenses
1. Choose a tracking method — Budgeting apps, Excel spreadsheets, or simple pen or paper will do. Pick one that works best for you.
2. Track your expenses for at least a month.
3. Review your monthly spending habits.
Phew, that’s it!
Once you know where your money is going each month, you can start working towards your savings goals!
Determine Your Saving Goal
There are many reasons to start saving more of your money, but it’s key to have a goal in mind.
Your personal goal.
A specific goal will help remind you why you’re saving, and what you’re working toward. Having a “why” in mind will keep you motivated to get your spending in check.
Are you looking to:
- Build up an emergency fund?
- Set aside money for a down payment?
- Save for a large purchase (trip, gift, etc.)?
- Pay off any debts or loans?
- Save for retirement?
You may even have multiple you want to work towards. Your end goal(s) will inform how much you need to save, and which goals to tackle first.
And — behavior change is hard, unless you define your goal. Then you make your life a lot easier.
Be specific about:
- What you’re saving for
- How much you need
- When you want to get there
You’ll be on your way, rather than stuck with a vague idea of wanting to save more money.
Get specific on why you want to start saving money to keep you motivated and on track to meet your goals.
Then continue to review your spending, at least on a monthly basis, to see if you’re on track or if you need to make adjustments.
Find Ways to Cut Spending
Once you’ve closely examined your spending habits and set your goal(s), find out where you can reduce your spending. This is where those categories will come handy.
Here are a few tips when considering how to cut down on spending.
After housing and transportation, food remains the biggest expense for most households. Cooking meals at home is significantly cheaper than eating out.
But it’s easy to overspend at the grocery store too. You can reduce your costs by planning your meals before shopping, so you only buy exactly what you need.
Consider cancelling any monthly subscriptions you’re not using anymore. If they’re set up to renew automatically, it’s just money you’re losing each month!
Identify any other non-essential costs and cut them out, or aim to reduce them. You can set yourself a monthly budget, so if you feel tempted by something you don’t actually need, you have to check to see if you have enough in your budget before you buy.
The Key to Achieving Your Saving Goals
Choose an area you think you’ll be most successful in reducing your spending. And start by setting yourself a small goal — something you can confidently achieve.
If you set a goal that’s too ambitious to start with, you run the risk of not meeting your expectations, getting discouraged, and giving up.
You don’t want that. There’s a smarter way to work up to ambitious goals.
When you’re building a habit, begin with easy goals. You get some wins because you can stay consistent with it. The consistency gets you used to saving each month, and the achievable goals build your confidence. This allows you to tackle bigger goals with ease!
Saving Money Begins With Tracking Your Spending
You won’t know how to move forward if you don’t know where you’re at now. Start by tracking your current spending habits so you have a clear picture of your finances.
It can feel overwhelming at first, so taking one small step at a time is the way to make progress.
And you’ll be thanking yourself for laying a solid foundation on which you’ll not only meet, but surpass the goals you set for yourself!