Money Savings Guide to Help You Save Money

June 18th, 2010

Most people automatically assume that in order to save money they need to put money aside somewhere. They have images of going without all the fun things in life while their money is locked away inside a bank account somewhere.

The truth about saving money is quite different. This simple money savings guide can show you some ways to spend less on the things you already pay for and how you can manage to keep more of your hard earned income for yourself each week.

Before you begin putting the tips from this money savings guide to work with your own finances, be sure you take some time to work on some short term, medium term and long term savings goals. This will give you some benchmarks to measure how you’re progressing and whether you’re on track or not.

Here are some examples of the type of goals you might create for your savings plan:

Short Term: This could be something simple, like saving for a DVD you want to buy, but can’t afford until next pay day. It could also be a larger item that might take you two or three weeks to pay off on lay-by each pay day before you can take home the item you wanted.

Medium Term: medium term goals are those that require a little bit of forward thinking and some long term planning. This could be something like saving for an overseas holiday or a new car or saving a deposit on a home.

Long Term: longer term savings goals should be for things like retirement savings, or perhaps even planning for an early retirement. If you plan on retiring early, it’s possible to create a plan to help get you there. This is especially true if you utilize the power of compounding your savings.

Reducing Debt As Part of Your Savings Plan

A big part of getting ahead with any savings plan is to reduce your consumer debt levels. Consumer debts are things like your credit cards, personal loans, overdrafts, or other high interest debts that cost you money each month.

Wherever possible, work on ways to reduce the amount of interest you pay on your outstanding debts. This will save you money each month on your interest charges and help you take control of your financial situation.

This could mean looking for ways to consolidate outstanding debts over to a loan charging less interest or finding a low interest balance transfer credit card to roll over your credit card debts.

When you’re paying less interest, this could mean that more of your payment is going towards paying down your balance rather than paying your interest costs. This could help you begin chipping away at the amount you owe far more quickly.

Create a Budget

When you’ve managed to reduce your interest costs as far as possible, you’ll need to start working on other areas where you might potentially reduce your costs. The quickest way to do this is to create a quick budget.

A budget is nothing more than a list of your current income and your current expenses and bills listed down. When you see how much you’re spending on your current expenses, it’s much easier to identify sections of your spending where you might cut back a little.

You might even find ways to accomplish the same things for less money. For example, you might eat out a little less frequently, or perhaps take lunch to work instead of buying it.

Establish a Savings Pattern

Once you’ve found a way to save some money from each pay you receive, make a goal of putting aside some of it each week. The more you can put away each week, the faster your savings will add up.

If possible, shop around for a savings account that pays you a high rate of interest. Most banks will pay you interest on your savings, but it’s important to maximize the amount you can earn on the amount you have put aside.

Be sure to check whether the interest is added to your savings monthly or at the end of the term. By having your interest payments added to your savings monthly, you can benefit from compounding interest, as your balance will grow faster than if you were to be paid interest at the end of the term (simple interest).

If you’re saving towards short term or medium goals, be sure not to lock your money away for a long time. You will want to have access to your funds when you need them, so look for an account that will pay your interest into your account on a monthly basis, but will still allow you to withdraw your cash when you want it.

However if you are putting money away for a long term goal, you might want to consider locking your money away into a longer term deposit account that can often pay higher rates of interest on your savings.

If you’re planning to save money for a specific goal, keep these money saving tips in mind. You’ll be regaining control of your financial situation and getting ahead financially at the same time.