The First Step on How To Start Saving Money
No one likes to save money because anyone would much rather live freely without any consequences, but unfortunately, if you are having financial issues then money is probably the issue. Learning how to start saving money begins with tracking your expenses.
Tracking each and every purchase may seem like a hassle to some people, but believe me, the feeling of peace and confidence that it offers is well worth it.
If you are looking for ways to cut back on your expenses then you can check out my money saving tips below! These tips allowed me to save a lot of money each month! And if you are looking to make tracking your expenses 100 times easier then sign up on my blog to receive my FREE budgeting template!
- 20 EASY WAYS to Start Saving Money
- 7 Things that I Stopped Buying To Save A Lot of Money
- Take Control of Your Money By Learning These 3 IMPORTANT Rules of Money
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1. Provide insights into your spending habits
The first step to start saving money is to find out how much your current lifestyle is costing you.
If you want to meet your financial goals and stick to your budget, then you first need to know what the problem is and what’s leaving your pocket every month. Tracking your expenses will allow you to diagnose what the problem is before you work to fix it.
If you’re making over 6 figures a year and you find yourself not having any money left over then maybe the income that you make isn’t the problem. Rather than aiming to make more money, why don’t you change your excessive spending habits? Once you make that change, you might find yourself with more money left over.
2. Allows improvement for some areas
Tracking your expenses allows you to pinpoint any amounts that are significantly too high. Look at each number and ask yourself can you really justify spending that much? if not, what changes can you make to lower that expense? Either eliminate it completely or find better alternatives.
- Phone Plan = Do you really need that 5GB of data? Maybe you can opt for a cheaper plan that gets you the basics.
- Gym Membership= You’re spending $60/month for a gym membership, but how often do you go? Does it make more sense for you to pay for drop-in rather than a membership?
- Food = Are you eating out too often? Eating out is convenient, but shopping and cooking for yourself end up being cheaper and healthier.
- Cable, Landline phone, Movie Subscriptions, Xbox membership = Do you still use these?
Want more money saving ideas? Check out this blog post with 20 EASY WAYS to save money!
3. Know your monthly expenses and Calculate “fun money”.
Tracking your expenses will allow you to foresee how much you will need to set aside each money to pay your necessities. Your housing/utility expenses will not be exactly the same each month due to its varying factors, but they should generally be around the same ballpark.
Everyone needs to have some money set aside for some fun in their life. With proper planning and budgeting, you can still enjoy life while still pursuing your financial goals. The problem is that some people don’t set aside the right amount.
Their fun money is paid out first BEFORE any of their expenses. Why?! Do you care more about having enough money to buy a bottle at the club rather than to keep the electricity running in your house?
4. Calculate your 3-6 months emergency fund
According to CNBC, only 39% of Americans have enough set aside in their savings to pay off a $1000 emergency. That is ridiculously low!
It’s always good to have some money set aside to cover for any emergencies. Many financial websites and experts state that the “average person” should have 3-6 months worth of expenses saved for any unforeseeable events.
Tracking your spending habits will let you know exactly how much you should be saving up. A student with little to no financial commitment doesn’t need to save up as much as someone who is looking after a family and also paying a mortgage.
5. Catch any unexpected or unusual charges
Tracking your expenses will allow you to be more aware of any suspicious activities on your account. The reason why this is last on the list is that it rarely happens, but it’s possible! It’s best to call your bank or credit card provider as soon as you notice any of these transactions, so they can reverse it.
These were the 5 reasons why you should be tracking your expenses:
- Providing insights into your spending habits
- Allows for areas for improvement
- Know your monthly expense and calculate “fun money”.
- Calculate your 3-6 month emergency fund
- Catch any unexpected or unusual charges
Let me know down in the comment section below if you have any other points you have to add on to this list! Do you have any tips to help others track their expenses?