How to Save Money
Being stressed out over finances is not okay. I grew up watching a lot of TV and sometimes I used to catch Prince$$, a show that Gail Vaz-Oxlade ran for normal girls that were spending over their means and putting their parents into debt. I also watched the other one where adults were using their credit cards like it was candy and spending over their means.
Here's what I learnt: spending beyond your means will bankrupt you. I feel this is super basic, but more and more I notice no one wants to talk about money with me and it's freaking me out. Why? Maybe it's because saving money is my favourite topic of conversation, but also probably because people just aren't as in love with it as I am and it makes them nervous.
Saving money isn't hard. It's actually really really simple, you just have to work for it.
There was a time right after I moved out that I realized I wouldn't be able to save for a while because I needed to buy stuff to move out and I would always have higher expenses. After a year of not saving, I always felt I couldn't get a handle on my finances and I went to Google to figure out a way to save that worked for me. I settled on the 50-30-20 rule, but tweaked it to fit me. Basically, instead of going month to month, I live paycheque to paycheque. On purpose.
The 50-30-20 rule works with your take home income and has savings built in. I love it and think it's super useful. It's also easy to understand.
50% of your net salary goes towards your needs.
30% of your net salary goes towards your wants.
20% of your net salary goes towards your savings.
Here are steps to make your budget that works for you:
1) Write down everything you have spent for the last two paycheques and place them in each category.
Chances are, you have a lot in the wants and needs and nothing in savings. This is the part where you tell yourself you need to lower your expenses and I am going to tell you that you are right!
2) Find places to cut.
I would love to be able to drop my entire paycheque on whatever I want, but to save you need to reduce your spending somewhere. I stopped buying makeup every month.
Here are my favourite places to cut:
- Food consumption. We eat so much of our money.
- Renting an apartment with newer windows and doors. It will save on heating and electric.
- Buying when you need to buy, not when you want to buy. I used to shop a lot because I wasn't happy, maybe that's what you are doing.
- Spending money on expensive cable packages.
- Buying new things. Used items work so well.
- Get a talk and text plan and ditch your data. Data costs so much money and no, you don't need it. I get wifi almost everywhere I go now.
- Bike to work and use your car sparingly.
- STOP USING YOUR CREDIT CARDS. Unless you use your credit card perfectly for budgeted items, you probably have stuff on there that isn't planned. Which means you should try an avoid it as much as possible.
3) Using your net pay for the month, calculate the amount that should go in each category
You've already determined you put too much money in Needs and Wants, so now you need to determine how much should actually go in these boxes.
50% of your net salary goes towards your needs.
30% of your net salary goes towards your wants.
20% of your net salary goes towards your savings.
4) Create a budget
You want to divide your budget into three columns, column 1 will be items, column 2 will be costs (with tax) and column 3 will be category. This is such a personal process, so I can't tell you what to put in each category, but here are some examples to see what you can put in Needs/Wants. Savings are just savings.
Needs: Rent, Heating/Electric, Phone/cable, Car payments, Insurance, Gas, Food (not restaurants), Prescriptions/Medical, Student Loans, Gym.
Wants: Subscriptions, Hair/Skin/Body care, meals at restaurants, fun activities.
Savings should just be savings. Savings are for costs you don't have every month, it's an expense that happens once a year.
Eventually, you will need to use your savings, you can use your savings for whatever you want, but save for things like: Car repairs and renewing my car info; downpayment for a house; travel; and unexpected costs like needing to get a new piece of technology because you drop it all the time.
That way, when your car breaks down, you have money to pay for it.
If your needs are higher than what it should be when you determined how much should go in each category, you should take the difference from your wants, not your savings. Maybe it means you have to sacrifice a fun lunch, or new clothing every month.
5) Make extra cash
The best advice I got growing up was to have two jobs as long as you could handle it. It can really help the household or even just adding to your savings. Sometimes you just need extra cash, especially when you are a student.
I worked two jobs in the summer throughout my entire University degree. Maybe you don't need to make extra cash, but it's an option.
Here are my favourite ways to make money:
- Obviously, having a job or two jobs
- Cleaning out your house for things to sell
At the end of the day, you will only save money if you actually dedicate yourself to saving money. My best tip, if everything fails, is to determine how much money you can safely save a month, go to the bank, and get them to take it out automatically every month and put it into a savings account. It will add up, even if it's just $20 a month.
If you have any questions, don't hesitate to ask.
Thanks for reading,
Samantha