Before making a budget plan, Andrea Woroch, consumer and money-saving expert, emphasized the importance of understanding much you spend each month on various things. “To determine this, it’s important to identify your budget baseline by tracking your spending for a few months,” she says. This way you know how much goes toward rent or mortgage, transportation, food, utilities, shopping, etc. Through this process, you will also be able to identify areas where you typically overspend. “Ultimately, this makes you more aware of your spending and saving habits to help you make better choices.” Try following these money-saving tips of great savers.
Use technology to your advantage
If you’re not sure where to start, try a smartphone app, suggests Justin Lavelle, Chief Communications Officer of Know Thy Customer, whose mission is to give companies more and better customer data. “If you have no idea how to make a budget or you get frustrated with the details, there are many apps that can help,” he says. He recommends Mint, a budgeting and finance app. “It actually connects with your bank accounts and over a period of time, it uses the data from your spending habits to offer ideas or set up a complete budget for you.”
Woroch suggested that working towards a goal can take the pain out of saving. “Having a specific goal keeps you motivated and excited to save money,” she said. “For instance, are your saving for a down payment on a new home or for a dream vacation with your family? Thinking about your goal will make cutting back easier to stick to.”
Divide and conquer
Saving is easier when you don’t physically handle the money, according to Lavelle. “Technology has made it easy to have a portion or portions of your paycheck distributed into special accounts,” he says. “You should have a main savings and retirement account that are funded each pay period with a set sum that is difficult for you to change.” He also advises using electronic payments for the same reason, as it eliminates the ability to move funds around or delay paying bills.
Saving for a big ticket item? Cameron Huddleston, life and money columnist for GOBankingRates.com, advises that we use auto withdrawals to save for expensive purchases, such as new furniture or a vacation. “The transfer should occur as soon as you get your paycheck. That way, you won’t have a chance to spend that money,” she says. “To figure out how much to set aside each month, divide the total cost of what you’re trying to save for by the number of months you have before you plan to make the purchase. If you find that it’s more than you can spare to set aside each month, you either need to find a lower-cost alternative to your purchase or find nonessential expenses you can cut from your budget for a while to save up.”
Make decisions with vision
Thinking of the big picture can help us with long-term and short-term decision-making, says Paul Morris, co-author Wealth Can’t Wait. “Create a ‘Wealth Vision’, which is a goal for where you want to be financially (income, expenses, savings, and investments) over different periods of time in your life,” he says. “Then, create awareness of where you are in that financial journey–ahead of schedule, on target, or behind schedule. This will help you to budget and make great spending decisions.” When preparing to make a purchase, he suggests considering two factors – where are you in your Wealth Vision (and would that purchase affect your journey) and how much value (intrinsically) will you get from the purchase—or how can you create the purchase so it serves you and makes you feel great.
Make a list and stick to it
We’ve all experienced entering a store needing one item and leaving with several. This kind of shopping can greatly impact your budget. Lauren Barth of The Shopping Mama blog, recommends making a list and sticking to it so you don’t get sidetracked. “It’s a simple way to keep yourself accountable—and attempt to curtail any unnecessary impulse purchases,” she says.