How to Save Money: 10 Simple Steps

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Sometimes, you wish to save, but find it difficult. You probably like the idea of saving but can not commit to the act.

I had a conversation with someone and she said, “How can I think of saving when my salary is insufficient?” This makes a lot of sense.

However, as much as possible, you must devise a means to save. It’s not only important, but it is necessary.

Here are ten simple steps you can use to save.

  1. Understand your finances.

Before you start saving, you need to understand your finances.

You should know your income as well as your expenses.

Know how much you make after tax deductions.

Consider your monthly expenses on feeding, rent, transportation, and clothing.

Also consider how much you spend on paying debts, amongst other expenditures.

Knowing your income and expenses will help you understand how to go about your savings and how to manage your finances in general.

It’s easy to think you’re earning a lot, which is probably true. But doing the simple math of knowing your income and your expenses will help to keep you in a reality check.

You get to understand what you are left with after tax deduction, and payment of your utility bills as well.

  1. Create your budget.

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Now you understand your finances. It’s time to create your budget.

Think of your budget as the map that will guide you on how to get to your destination without wrong turns or distractions.

Create your budget by writing out how much you’ll spend, and what you’ll spend on in the month.

You can go through your bank app history to know what you’ve spent in the past months.

It will give you a guide on how you should create your budget.

You can also make use of Dave Ramsey’s envelope budgeting system. It can help you if you seem to spend on things you don’t need.

The envelope budgeting system is one where you keep certain amounts for different purposes in their respective envelopes. If you use the money for a particular purpose, that’ll be all you get to use until your next budgeting period begins.

For instance, 

Feeding —  $500

Rent — $500

Transportation — $300

Miscellaneous — $200

The envelope system means you’ll stick to the designated budget in all envelopes. 

You can use an App to achieve this instead of using physical envelopes and cash.

A budget without use is as good as not creating one at all. It’s time to use your budget.

  1. Automate your savings.

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Now that you’re using your budget, it’s time to automate your savings.

It’s easier to save without the hassle of outrightly taking out money from your bank and putting it into another bank or other saving platforms.

Though you’ve decided to save, it may be difficult to consistently go through the process manually.

You may wonder if your money is not better off where it currently sits.

You may see a flashy item and decide to spend on it or you may simply forget to take out the money.

These are a few reasons why you should automate your savings.

Once you automate your savings, you won’t have an excuse not to follow through.

If you want to start saving, the easiest way for you to consistently achieve it is to automate your savings.

  1. Reduce your expenses.

Now you are saving, it’s time to cut back on unnecessary expenses.

You have just created a new important channel through which your money is going out, you should cut the existing unimportant channels.

Again, create a list of all your expenses, cross off unnecessary items on the list, also check items that you can cut your budget from.

When you do, you’d be surprised at certain things you spend on that are irrelevant.

It could be subscriptions to things you hardly use or do not use.

It could be shopping for the things you don’t need.

  1. Get an extra source of income.

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If you have different streams of income, that’s great. If you don’t, you should get an extra source of income.

If after saving, your current income is still the same, it means you have less money than you used to.

It’s a good way to get your income back up.

Even better, the extra income will make you have more money than you used to have.

If you are uncomfortable with the idea of saving because your current income is barely enough, you can make it better by getting an extra source of income.

An extra source of income will also give you the option of saving more.

You can make extra income from freelancing.

  1. Payoff / manage your debts

One of the things that can hinder your saving progress is debt.

When you are indebted, it’d be difficult to save. Your income is being used to settle debts, so you’re barely left with anything to save.

Pay off or manage your debts to give you the liberty to save.

The faster you pay your debts, the more you can save.

According to Fortune.com, Grant advises that you should pay your debt before investment.

“When it comes to high-interest debt, the sooner you can pay it off, the better off you will be over time. Folks often come to me looking to invest, while still carrying high-interest debt. Failing to realize that if the debt is costing you more than the investment is making you, it makes more sense to pay off the debt prior to making any new investments.”

Pay off your debts to make more in savings or investments.

  1. Choose the right saving platform.

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Save in a platform where you can get interest for your savings.

Make an informed decision and save your money on the right platform. 

Save in a trusted and secured platform.

You’re thinking of savings as a safe place to keep your money, which is true. 

But what better way to keep your money than to keep it where you get some interest?

  1. Set your saving goal.

One of the questions you should ask yourself is the purpose you’re saving.

“Goal drives action”. I made it up, but if you think about it, you’ll realize it’s true.

Having a saving goal will help you stay dedicated and consistent. Get your reasons, and stick to the goal to help you stay diligent.

What are your short-term goals? For instance, emergency funds, cars, etc.

What are your long-term goals? For instance, retirement.

  1. Keep track of your expenses.

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We earlier agreed that you will reduce your expenses, it’s time to keep track of it to help you know where and how to make adjustments.

It’s of no use, if you cut down your expenses, and then start spending on some unimportant kinds of stuff, that’ll be an endless cycle.

Keep track of your finances for better management and progress.

  1. Assess your progress.

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Assessing your progress will not just make you accountable, but it will also make you want to do better to keep making progress.

For instance, if you’re saving $200,000 monthly, in three months, you’d have saved $600,000.

When you access your saving progress, you’d want to keep it up.

The knowledge of your progress will make you want to do more.

Conclusion

Saving is not only important, but it is a necessity.

You can start small, and then increase as time goes on, this will help you so you don’t get overwhelmed.

Make sure you have enough left to take care of your needs, don’t save everything and be left with nothing.

With these simple steps, you can start saving. 

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