I think of the Seinfeld episode where Uncle Leo says that Nana is on a “very fixed income” when it comes to being on a tight budget, but that is not the case at all. Maybe your expenses are high, your income is low, of even worse, you are in between jobs, which doesn’t leave much left after the bills are paid. No matter the situation, saving for the future is a priority, so any adjustments you can make so you can save money, even when money is tight, should be the focus.
Make a Physical Budget
Most of us don’t keep track and allocate funds to know what we should spend, so a great way is to actually keep track. Pull your couple months of statements to see what you have been spending on average, and try and set up a budget for expenses, food, gas, and entertainment. As you now are keeping a closer eye you can reduce unnecessary expenses and free up extra money at the end of the month that you can use for savings. Take a look at the amount of times you eat out. If you can reduce that, you will free up significant savings.
Set Up Automated Savings
A great way to save money is to eliminate the manual work. When you have your entire paycheck deposited into your checking account and you see the full balance in there, you are less likely to move money over to your savings account before you spend it. I know if I was given a sum of money, my first instinct would not be to save it, so by setting up direct deposit to your savings account, you can hopefully not miss that money and watch it grow at the same time.
Put the Plastic Away
Credit cards can be great when it comes to rewards, and not having to pay the balance back until next month, but that can be the death of your finances for others if you have a spending problem. By putting the credit cards away, you can focus on spending only the money you have available in your checking account, or better yet what you have allocated yourself to spend, and once that money is out, it’s out until the next paycheck. This is especially good when it comes to avoiding impulse purchases, and seeing if you still want the item by the time you wait until you have the money available.
Stick with It
If you have had spending freedom before this will definitely be a new way of life, but once you can reduce spending and increase savings, you can see that amount grow. Once you have a solid emergency fund built up in your savings account, you can focus your priority to saving for retirement by reducing the amount that goes to your savings, and increasing contributions to 401(k) accounts, especially if you receive matching contributions from your employer. While you should be contributing to 401(k) all along, once you get situated with your finances, you can increase what you contribute.