Savings are the foundation of your financial success. You must save money. Lots of it. I encourage you to read this article and find ways to increase the amount of money that you save each month. Each dollar saved can then be used to invest and earn a return. The more saved and the higher return, the closer you will get to financial freedom.
Examine Your Large Expenses
First up, your large expenses. Your #1 expense is housing. Unfortunately, you can’t eliminate this expense completely because everybody needs a place to live (unless you’re staying with a friend or family member for free, of course). It’s important to minimize your housing expenses as much as possible. Too many people allocate 30%, 40%, 50% and up of their monthly take home pay to their mortgage.
If you’re locked into a high mortgage, do everything you can to refinance or get a loan modification. There are many programs available from government right now in an attempt to stimulate the economy and the housing market. Furthermore, do what you can to minimize housing related expenses such as maintenance and utilities. Shoot for a 10% reduction in your utilities bills. That money will add up.
If you’re not locked into a mortgage yet, I strongly encourage you to use extreme caution moving forward with regards to buying a home. Renting has a bad name when in fact, it is a great option for many people. Run the numbers and choose the least expensive option. For more information on housing expenses, click here.
Other large expenses include your automobile. You may consider cutting back to one car in your family if you have two. We take for granted the idea that we all need two cars. Think about how you can get by with one, and then sell the other. You’ll save on insurance, gas, maintenance, etc.
Cut Back On Your Lifestyle
You also need to closely examine your spending habits on things such as food, entertainment, travel, etc. Americans are used to a very luxurious lifestyle based on a booming economy and a shiny credit card. Resist the urge to “live it up”, rather be responsible and save money now.
Limit the amount of money you spend eating out at fancy restaurants. Instead, cook large amounts at home and eat left overs for a few days. Find free or cheap ways to have fun with family and friends. Rent a movie instead of going out. Play games instead of spending money elsewhere. There are tons of options. Be creative.
Other Tips
I also encourage you to start looking in to weekly coupons. It’s amazing what you can save money on. Avoid brand name products and instead buy generic. Unless you’re investing in a long term product, often times the generic ones will suffice.
Track your spending. It’s amazing how much of an impact this simple exercise can have. Knowing where your money is going to will often show you something you didn’t know and force a change in your spending habits. All of this can greatly contribute to an increase in savings.
