Dealing with money and budgeting can seem overwhelming but by tackling the basics, you’re setting yourself up for success and can move onto more advanced personal finances when you feel ready. These 8 personal finance tips are a great place to start if you want to save money.
1. Diversify Your Income
In a world full of opportunity, it would surprise you how many sources of money you could find, with the help of some work and creativity. There are many easy ways to make money, for example, on the Internet. There are web sites where you can earn money just doing some simple tasks. Or if you want to specialize in a particular area, you'll probably find something that appeals to you.
This may cost you extra effort, but it will be worth it when your income starts to increase considerably. It will help you to make more investment plans (the more planes you make, the more likely you are to succeed) saving capacity, and even for your personal and leisure use.
So imagine you have the ability to pay bills, save money, treat yourself, keep investing... And the money stays multiplying!
2. Set Specific Financial Goals
Most of the time our goals are not set in an effective way, which can conduct to a lack of accuracy in the outcome. You may feel that you are working too hard to reach that goal, but maybe you are not applying the right techniques, therefore it costs you more effort than it should. If you are looking for specific results you should pay attention to details that will lead you there.
Ask yourself questions like, how much debt do you want to pay off, and when? How much do you want saved, and by what date? That will help you to take your goals as a real challenge and to have more organization about your monthly income and expenses. So consider this every month and compare the results.
3. Set A Budget
When you start looking for personal finance advice or help, one of the first things most people will tell you is to start a budget. Budgets are important because they prevent overspending (assuming you stick to the budget).
Budgeting is a lot of like dieting. Just like there are a bunch of different types of diets, there are different approaches to budgeting. You just have to figure out the strategy that works for you. The best kind of budget is the one you can stick to.
We're not talking about a prison cell to keep you away from your money. Rather, it's a tool you use to make sure your future is better and richer than your present. If you don’t feel like doing it solo, you can talk to a personal finance advisor that will look at your income, expenses and lifestyle, and create a budget for you.
Budgets are an integral part of running any business efficiently and effectively, but individuals and families can have budgets, too. Creating and using a budget is not just for those who need to closely monitor their cash flows from month to month. Almost everyone, even people with large paychecks and plenty of money in the bank, can benefit from budgeting.
4. Build an Emergency Fund
It might be tempting to put all of your savings toward exciting financial goals such as saving for a home or a car, but an emergency fund is even more important. This is money set aside to help you through unexpected events that can hurt you financially, whether it be a medical emergency or losing your job. So, if an adverse event occurs, this fund can protect you from having to use credit cards or take out loans.
The recommended emergency fund should have 3-6 months worth of expenses, but some experts recomend saving $1000 in the emergency fund, pay off debts and then complete the 6 months worth.
Now, saving money in an emergency fund is only half the challenge. The other half is not touching it until it’s absolutely needed.
5. Contribute to a 401(k) or IRA
Retirement may seem very far away, but the sooner you begin contributing and the more you set aside, the more you will potentially have when the time comes.
If you are offered a 401(k) plan by your employer, you should be contributing as much as possible. Take advantage of any matching funds your employer provides as well. The money you contribute is excluded from your taxable income.
If you don’t have access to a 401(k) plan, you should look into an Individual Retirement Accounts (IRA). As with 401(k), contributions to traditional IRAs are tax-deductible and the assets grow tax-deferred until you begin withdrawals.
6. Reduce Variable Expenses and Eliminate Unnecessary ones
Your monthly spending can be broken up into two categories: fixed expenses and variable expenses. Your fixed expenses are the same every month, such as rent or mortgage, loan payments or school bils. Your variable expenses are those that change month to month, like food, shopping, and entertainment and are the ones you can manage. Some of these expenses can be completely cut out and others can be reduces.
7. Avoid impulse spending
It is very easy to think we really need something that we usually don’t. A way to evaluate this is to think it over for at least one day. Items on sale, especially, can be very tempting. But, if we fight the impulse and review our purchase better, we may realize we can save that money.
8. Don’t Increase Your Lifestyle Costs When Your Salary Increases
If you get a raise, be smart and don’t raise your monthly costs. Many people upgrade almost everything when they earn more money. If, on the contrary, you keep your expenses the same when you have a greater income, saving momey becomes a lot easier.