Saving money for a future expense or emergency fund can be tedious. So, what should you not do to save money?
When your savings start to grow, you are tempted to spend that money on something you want or need. But there are many benefits to starting and maintaining a savings account, including financial security and peace of mind.
Read on to explore this simple list of things to consider when starting to save.
Why is Budgeting Important?
Many people hate budgeting. They think it restricts your spending and creates a lack of freedom.
If not done right, budgeting can backfire. Done right, budgeting helps you separate your needs and wants.
Needs are those things that you must have to survive. Think about the basics, such as food, shelter, and utilities.
Wants are everything else on your list that makes your life easier and more fun.
Budget is a balancing act to pay for your needs and determine what you really want.
Budgeting also includes a savings plan, which might be an emergency fund, investing for retirement, saving for a new car, or a family vacation.
Budgeting also creates a plan to eliminate debt, saving you money.
Things You Shouldn’t Do When Trying to Save Money
Saving money involves making choices. Here are a few things you should avoid when trying to save money:
1. Go On a Pricy Vacation
When you have savings goals, you can prioritize expenses. You may need to forego an expensive vacation in pursuit of other goals. Ask yourself if you’d rather have a luxurious vacation or a home in a couple of years.
If the kids are begging for a trip to Disney World or you are craving a week on the beach, make sure you plan ahead with a savings plan. When planning a vacation, shop around for cheap flights or package deals. Traveling in the off-season will often save a lot of money.
While some vacations are trendy, make sure they are what you want to do. Instead of climbing Mt. Kilimanjaro, head to a mountain closer to home.
2. Pay For Entertainment
Restaurants, bars, and movie tickets can add up quickly. If you have savings goals, you might look into less expensive forms of entertainment.
Picnics in the park, movies in your backyard, and parties at home cut those discretionary expenses way down without sacrificing the fun factor. Check out free days at zoos or museums or maybe volunteer at festivals or concerts for free admission.
3. Ignore Your Bills
Make sure you pay your bills before spending money on discretionary items.
And while it’s essential to save, do not ignore your bills to fund your savings account either. You will incur late fees, and it will put a ding on your credit report, which can cost you more money on interest when you decide to make a major purchase.
4. Pay Unnecessary Bills
If you’re paying for a gym membership and not going to the gym, you’re wasting money that could be set aside for savings. Likewise, with subscriptions. They often give you a free trial, hoping you will forget to cancel before the trial.
Avoid trials that ask for a credit card, uncheck the box that says automatic renewals, or note the end of the trial in your calendar and cancel before then.
Peruse your bank and credit card statements each month for things you can eliminate. If it’s not a need, it’s a want, and you can consider cutting it out of your budget.
5. Buy Expensive Gifts & Clothes
Before heading to the mall or ordering something online, give yourself time to consider your purchase.
Waiting 24 hours between seeing something you “have to have” and making the purchase gives your brain time to calm down and think about whether you really need it and whether the novelty will wear off.
What is more important, new shoes or sticking that money into savings? Another way to look at it is this. If you make $20 per hour and a pair of shoes costs $100, are those shoes worth 5 hours of your time?
If you are buying a gift, think of that person. Will the person be happier with an experience or even the gift of your time? Perhaps a homemade gift will be more cherished.
6. Continue Bad Habits
Smoking, drinking, and eating fast food are not only bad for your health, but they are also bad for your wallet. Track how much you spend on your habits—it may also be worth breaking them for financial reasons.
If you head to the office vending machine out of boredom, realize that $20 a week spent on candy and chips adds up to $1,000 a year that could go into your savings account.
7. Buy New Books
Be honest, how many books are on your bookshelf or in your Kindle that you haven’t read? Often, buying books is an impulse purchase. They smell good, and we intend to devour the content as soon as we get home.
Instead, write down the title, wait a few months, and then look for it in the used bookstore if you still want to read it.
Online booksellers frequently give you the option of purchasing the book used—often in mint condition. Better yet, head to your local library and borrow the book. While you’re there, check out their DVD collection, e-books, audiobooks, and free classes.
8. Pay Others to Do What You Can Do Yourself
If you’re handy, repair your dryer instead of buying a new one. Watch YouTube videos on how to lay hardwood floors or replace a leaky faucet. Mow your lawn instead of hiring a service. Change the oil on your car instead of heading to a mechanic. If you can do it yourself, you can save money.
9. Upgrade What You Already Own
This is one place where we might encourage you to spend money. New appliances can save you money in the long run. They are more efficient, and this translates into lower utility costs. Adding insulation, weatherstripping, upgrading windows, and adding solar panels can reduce your heating and cooling costs.
10. Be Unproductive in Your Spare Time
Each of us is given the same amount of time in a day. How you choose to spend that time is up to you. And taking time to relax and unwind is essential. But if you have a savings goal and a lot of spare time, you can utilize that time to make some money.
Spending time scrolling through Instagram is entertaining, but it won’t add to your income or savings account. On the other hand, getting a second job or starting a side hustle might.
6 Simple Ways to Save Money
If you are having trouble finding money to save, here are some simple ways to start saving money:
1. Record Your Expenses
The first step in saving money is to become aware of your spending habits. Your income comes from your paycheck or other work you do for pay. Your expenses can be fixed or variable.
Fixed expenses include bills that stay the same each month, like rent or mortgage, insurance, phone, and gym memberships.
Variable expenses change each month, including utilities, groceries, and entertainment. Then there are the other things you whip out your debit card to pay without a second thought—coffee, fast food lunches, movie tickets, or books.
Tracking your expenses for a few weeks to a month will bring awareness to your spending habits and where you might be wasting money. You can use an app, piece of paper, or bank statements to start recording your expenses.
2. Include Saving in Your Budget
Your budget should include your needs, wants, and savings. Too many people live paycheck-to-paycheck with little to no savings. So, when something goes wrong, it adds stress and debt into the mix.
Setting aside a percentage of your income into a savings account will give you peace of mind when something unexpected happens.
3. Find Ways to Cut Spending
Once you know where your money goes, take a close look at each expense:
- Shop around for a better insurance rate.
- Talk to your mortgage company about refinancing.
- Shop around for a cheaper place to rent.
- Talk to your cell phone provider about bundling services for a better rate or switch providers altogether.
- Clip coupons for groceries.
- Cut out that gym membership and go running in the park instead—purchase hand weights for strength exercises.
- Shop at thrift stores instead of heading to the mall.
- Wait for sales on something you want.
- Examine your apps and subscriptions and cancel the ones you rarely or never use.
- Watch a movie at home instead of heading to the theater.
The options are endless. It helps with your mental health if you find cheaper or low-cost substitutes for items. It eliminates that feeling of lack.
4. Set Savings Goals
Savings goals include an emergency savings account, investment funds, and setting aside money for retirement. After paying for your necessary expenses, determine how much of your income to put into a savings account.
You should start with an emergency fund of $500-1,000 and build that up to 3–6 months of salary. This fund will pay for unexpected expenses, such as your car or furnace breaking down. If you lose your job for any reason, this fund will get you through those tough months until you can replace your income.
If you dip into your emergency fund, replacing that money should be a priority as soon as possible.
It can be tough to start savings, so set small goals—say $20 a week. Once you are comfortable with that, you can celebrate your discipline and increase that amount.
At the same time, you should set retirement goals. If you have steady employment, you can contribute to a 401(k) plan, taking advantage of any matching funds.
After those two accounts are set up and funded, look at investing your money in an investment fund that earns more interest than a regular savings account. These could be certificates of deposit or purchasing stocks and bonds.
5. Determine Your Financial Priorities
Once you determine a purpose for your money, saving becomes much easier. Remember that you are saving for your future—whether for peace of mind, a vacation, a house, or a college savings fund.
Having a plan for your money will make saving for it more straightforward.
6. Make Saving Automatic
Diverting your money into a savings account automatically is easy and effective. You don’t even see the money before it gets into an account.
If your employer offers direct deposit, earmark a percentage of your salary into your savings account and the rest into an account used for expenses. Vow not to touch the savings account unless it’s an emergency.
Watch Your Savings Grow
Once you start stashing money into savings, you will learn the power of compound interest. In a nutshell, this is earning interest on your interest.
Let’s say you put $1,000 in an investment account. You earn some interest, and this $1,000 grows into $1,010. Then you put in another $1,000.
The next time you earn interest, you are earning it on the money you put in, and the interest, $2,010. And so on. Over the years, this adds up.
When you are young, contributing to a retirement or investment fund offers more opportunities for your money to grow. But if you didn’t get started early, don’t panic—start now.
Concluding Thoughts On What Should You Not Do To Save Money
Saving money is essential. While some people can whip out their credit cards and purchase whatever they want, the vast majority of us need to create a budget that includes a savings plan.
Without one, we face trouble and stress at the first major setback. So, give these money-saving tips a try and your bank account will thank you!
If you need help with a savings plan, check out these free financial tools and resources.