How to Save Money Fast: 6 Money Saving Ideas
Saving money and paying off debt is a marathon, not a sprint. But sometimes it doesn’t hurt to put in a little extra effort. If you need money saving advice on how to pay off debt and save quickly, consider these easy steps to accelerate the process. They might seem simple, but they’ll add up in the bank fast.
Make a budget
To learn how to budget and save money, start by analyzing your budget. Go through your checking and credit card accounts to figure out where your money goes. You may be surprised to find out how much you spend outside of your basic bills and necessities. If you’re not putting any money into a savings account, make a budget item specifically for saving. Cut back on other expenses if you need to, such as going out, groceries, or clothing.
Stick to your budget using the envelope system
Once you’ve created a plan to save and pay, you need to make sure you adhere to your plan. An easy method to budget and save money is to place your pre-determined budget amounts into separate envelopes and only use cash. You could keep a grocery envelope, an entertainment envelope, and a gas envelope, for example. Then only spend the cash in each envelope throughout the month rather than relying on your bank account. If you fall short at the end of the month, live lean until your next paycheck.
Create a separate savings account online
It may be convenient to keep your checking and savings accounts with the same bank, but the best place to save money is in a separate financial institution. By doing so, you make it more difficult for yourself to transfer money out of savings back into checking for unnecessary purposes. Additionally, choosing an online bank allows you to shop around for the best interest rate. While most savings rates are low these days, every percentage point helps.
Set up an automated savings account on payday
As noble as your intentions may be to set aside a certain amount of money each month, it’s easier said than done. To circumvent your own temptation, set up a savings account that automatically debits the amount you want to save from your checking account. Set it up so that the debit occurs on payday; that way, you can adjust your discretionary spending to accommodate your savings goal, not the other way around.
Analyze your debt to savings ratio
Generally speaking, you want to save more money each month than the amount you pay in monthly debts. Once you’ve decided how much savings to put away, divide the amount you pay each month towards debt by your savings amount. This number is your debt to savings ratio. The exception to this rule is if you are paying off a substantial amount of debt with high interest attached to it. To figure out how to save money and pay off debt, assess your finances and determine if you feel comfortable with your current savings level. While your debt interest rates are likelier higher than your savings rate would be, you don’t want to accumulate more debt if you stumble into an emergency situation. Ideally, it’s best to both save and pay off debt at the same time.
Change your tax deduction
Another piece of saving advice is to change your tax deduction if you receive a hefty tax return each year. While you may like getting a big chunk of change back from the government, you’re actually denying yourself the opportunity to save and pay off debt more quickly. Change your deduction so that you receive more take-home pay each month. Then instead of increasing your discretionary budget, funnel that extra cash directly into your savings account or debt. Think of the 12 months of interest you’ll either earn through savings or save through paying off debt even faster.
You don’t always need to add an extra job or hope for a bonus check to cushion your savings account. By following these simple steps, you’ll pave the way to effective spending and saving that will put you on the path to financial success.