As we enter into different stages in our lives, we realize money really does make the world go round. If you are a college student, a young professional in your first career, a well-established 30-year employee or entrepreneur, managing your finances and understanding ways to save money will help you in every area of your life! From purchasing your first home to investing in passive income opportunities to traveling around the world or starting a family, I have 8 simple ways to save money to help you build the future of your dreams! Let’s get started!
1. Live with a student budget mindset
If you are a college student, you are already living on a budget! Scroll down to step #3 and you’ll find great budgeting tips! For those of you who have a full-time career (the majority of us), this is one of the most important aspects of saving money – create a student budget mindset!
While attending school, money was scarce and we needed to plan accordingly. Once you start a full-time career, the money begins to pour in (in the thousands) and we have the freedom to become ample consumers. REMEMBER: With freedom comes great responsibility. The key to this phrase is response-able-ity – you are able to respond to this freedom with wise intentions.
The takeaways: After starting your career, live as if you are still on a student budget.
2. Pay off student loans
You might be asking, why are we spending money when this is about saving money? Almost all loans have an interest rate, which means you pay back even more than you owe – this is how banks make their money!! In the end, you spend more, save less, your debt-to-income ratio doesn’t improve, and your credit score suffers.
Depending on your monthly income, how much you owe, and near-future large purchases, paying off debt will help you save money in the long run and take a load off your shoulders (creating a healthier mindset)! For example, a friend of mine had about $13000 in student loans. She had about $20000 in the bank, but each month she was paying the bare minimum on her student loans. We evaluated her monthly expenses, savings plan, and student loan debt. She ended up paying off her student loans in five months!
The takeaways: If you are able to pay off your student loans, do it now!
p.s. Once I graduated nursing school, I had very few monthly expenses (little rent/no car loan) and was able to pay off my student debt within the first three months of starting my career.
3. First things first -priortize your spending! Needs vs. Wants
This is HUGE! The world has made us consumers in wanting the newest, shiniest, most attractive items! What is your kryptonite? Fashion items? New cars or specific car models (Honda versus Mercedez)? Newest phones or gadgets? In this day and age, you need discipline and determination to save money! If you have fallen for this consumerism mindset you are not alone!
The first step to putting first things first and prioritizing your spending habits is to identify your end goal with your savings account! This is going to be the “why” behind why you will not buy the … new Michael Kors purse, the “in fashion” clothing item for the season like Levi’s 501 jeans, the new iPhone 13, the BMW M5, the newer mountain bike when you already have one that works perfectly fine!
Once you identify your goal for your savings account, if it’s really what your heart desires (for me, it’s to buy my first home), then it will be with great discipline and determination you will say “no” to purchasing an item, knowing that there is something greater you are saving for!
The takeaways: Make a savings goal (label your savings account with a nickname of your goal). You must ask yourself, “Do I need _ more than my savings goal?” …and this is for almost EVERYTHING. It’s tough, but you’ll see the results soon enough. In order to fully complete step 3, you must also work on step 4!
4. Create a monthly budget
Regardless of how much you make, you still have room to save money! First things first, take a look at your spending habits. How many times do you eat out a week? For lunch? For dinner? Do you pick up coffee daily? Do you online shop? Do you go to the mall weekly? Do you splurge on activities? Do you replace items that aren’t broken, but you’d like something newer? Do you go out multiple nights a week? All of us have spending habits and only you will know what you can cut back on. Take responsibility for your finances by looking at your bank accounts and credit card statements!
Next, identify how much money is coming in and how much is going out (with necessities only). This is a crucial step as this will be your guide for how much money you can save per month. Start to create a savings goal biweekly, monthly, or yearly.
For example, I estimated how much I made a month (after taxes), created an ideal savings goal per month and calculated my yearly savings goal. Let’s say I wanted to save $50,000 a year. I divided that by 12 = ~$4166 divided by 2 (for my biweekly paychecks) = $2083 per paycheck. Play around with the numbers and build your confidence with the goal you set!
The takeaways: Identify your income and necessary monthly expenses. Create a savings goal biweekly, monthly, or yearly (it will be the “why” behind #3). Start saving with the goal you set and see if it works for you! You’ll have to make adjustments at first, but when those numbers start to build… you’ll feel like you can fly!
5. Pick the right savings account
After you figure out your monthly budget and savings plan, pick the right savings account. Open a high-yield savings account, money market, or certificate of deposit to build your initial investment and grow your funds safer.
Opening an online savings account will have a higher annual percentage yield (APY) than a traditional bank. For example, American Express High Yield Savings Online is 0.4% APY and FDIC insured up to $250,000. With the state of the economy right now, the APY is significantly less than two years ago, but it will gradually increase. Find a reputable company and open up a savings account today!
Another option is to open a CD – Certificate of Deposit – which can sometimes lead to a higher APY. The difference between a regular savings account and a CD is the regular savings are readily available funds and great for monthly deposits; the CD is a one-time deposit, set to a certain amount of months or years before the money can be readily available.
Look into money market accounts with reputable banks or credit unions. Usually, money market accounts will require a higher deposit and higher minimum balance than a savings account. Nevertheless, look into all your options!
The takeaways: Choose a reputable high-yield online savings account, money market account, or certificate of deposit to start saving the right way today!
6. Using credit card benefits/coupons to your advantage
For most people, credit cards and “plastic” sound like a bad idea. My dad makes snarky comments about how much plastic I have in my wallet, but unbeknownst to him, I earn free money with every purchase (you can’t lose)!
The key to understanding credit cards is ONLY spending the money you have – just in a different form (plastic instead of paper) and receive benefits from it! If this is your first credit card, choose a card with no annual fee and earns cash benefits with x3 on groceries x2 gas stations and x1 on all other purchases. These are necessary purchases for everyday living, so why not receive free money! I love Blue Cash Everyday® Card from American Express (the cash back rewards can be used towards your statement balance)!
Also, opening a company-specific credit card can give you the option for interest-free payments for a certain amount of months or give you a percentage off from what you are currently purchasing! For example, at Wheelworks I opened up a credit card for 6 months of free financing for a large purchase. At Williams Sonoma, I opened up a credit card for 20% of my total purchase and 0% interest-free financing for 3 months. Use the plastic to save money and ultimately, benefit you!
Coupons… oh coupons. Take the 10 seconds to go on their company website and see if there is a coupon! When shopping online, signing up for their emails or text messages can give you free shipping or a percentage off an item or even your entire purchase. Use consumerism to your benefit on the necessary items you need to purchase!
The takeaways: Apply for a credit card and use their benefits to your savings advantage. Choose a $0 annual fee, great cash back feature and apply it to your statement balance! Never spend what you don’t have in liquid funds (remember #3). Look for company-specific credit cards or coupons to help you save with your necessary purchases.
7. Outsmarting the grocery store
Decide what grocery store meets your needs for the right price. Shop around your area and locate the items that fit your healthy lifestyle. Go to your local farmer’s market and spend time at the different booths.
Use what’s on sale to construct your meal plans for the week! Pick the fruit on sale or what’s in season, pick the organic pasta sauce that’s new to the store – use store promotions for your savings! It’s small savings at first, but it will add up over time.
The takeaways: Identify the best grocery to fit your needs. Use store promotions to construct meal plans for the week!
8. Old vs. New car dilemma
There comes a time when you need to decide if you would like to keep your used car or purchase a new one. The ultimate goal is to save money right!
By purchasing a new car, you will have a monthly car payment and your debt-to-income ratio increases as your credit score decreases. By keeping a used car, you may have unexpected problems and extra maintenance to tend to. Here are some important things to consider:
- What is my monthly budget? Look at your finances.
- What is the state of my current vehicle? How well is it running? Is it worth keeping it around? If it needs more work, do I have a plan B? Sell, donate or trade it in?
- Can I afford a newer vehicle?
- What do I currently have in my savings account? What is my ultimate goal with my savings account?
- Are there any big purchases coming up in the next year, three years, five years? Think about your credit score. (Rule of thumb: don’t buy a brand new car, right before you decide to purchase a home).
If you decide to purchase a new car:
- What do I need out of this vehicle? Commuter vehicle? Off roading? Family car?
- What are the insurance and maintenance costs? What is the gas mileage? Should I switch to a hybrid or fully electric vehicle?
- Look at the best time of year/best time of month to purchase a vehicle.
- Can I afford to put half down? Rememebr you will be paying interest on that car loan.
How you can look at it: Each month you do not have a car payment is a month you can save $300-600, not to mention the down payment. On the flip side, sometimes investing in a new car versus continually fixing an old car saves you money.
The takeaways: Look at the state of your vehicle and create a plan B if you decide to keep your used vehicle (just in case you do not want to put more money into it). Congratulate yourself for saving money and keeping a great car! If you decide to purchase a newer vehicle, think about your monthly budget, down payment, insurance and maintenance costs as well as any large purchases you may be considering in the near future!
So…how do you save money and properly manage your finances?
Start by creating a student budget mindset, pay off debt, prioritize your spending (needs vs. wants), construct a monthly budget, invest funds into the right savings account, use credit cards and coupons to your advantage, grocery shop with a savings mindset and decide on the best option for your transportation!
Finance has always been a huge interest of mine, so use these tips and tricks to save money and manage your finances better!
You can achieve anything you put your heart and mind into! Start building your savings account TODAY! You can do it!
– Brenna
