When it came to money I was the most frugal person you would ever meet. It’s not that I didn’t believe in savings or didn’t want to save money, but I was the type of person that wholeheartedly lived by the “Treat Yourself” model. Until last year, I lost my job twice, pushing me deep into financial hardships and without an actual savings account to back me up. I walked into the new year with four maxed-out credit cards, owing over $1000 to friends and family, and my savings account was an actual joke. I was overwhelmed with debt and I was barely staying afloat. I knew that I had to change my habits when it came to budgeting and saving. I received a personal budget planner and I began to work. Here we are today with four grand saved and counting. Whether you are saving for a trip, a big purchase or just to save, you can do it. Here’s how:
Make the Commitment
When it comes to budgeting, changing your mindset is key. You have to be committed and accept the fact that you cannot spend as freely as you used to. Start by setting benchmarks for yourself (ex: How much would like to save? How long are you planning to save?) For me, that goal was to be debt-free and to have a solid savings account. After you’ve established your goals you want to compare your expenses and your income, if you are spending more than you are making, then it’s a problem. The amount of money that you make in a year, or however way you break down your income should be more than what you are spending. When I did my comparison, I was spending way more than I was making and only saving ten percent of my income, which most of the time I would transfer right back to my checking account. Also, include your debts as part of your expenses. In order to truly save, debts needed to accounted for and managed. Get yourself a planner and list down all your expenses: rent, phone bill, personal care, and spontaneous expenses such as eating out or to the movies just to name a few. When you have that all planned out, begin the next step.
Cutting Off, and Letting Go
Get rid of all subscriptions that aren’t necessary. I personally had over ten subscriptions. I got rid of the ones that weren’t essential, which decreased my expenses immensely. Delete your takeout apps (try to eat at home), and unsubscribe to any clothing websites that you frequent. Once you are in a comfortable place financially, you can revisit resubscribing. Like the “out of sight, out of mind” mindset, you cannot be tempted if you don’t see the temptation.
The general rule of thumb of saving is 50/30/20, which is a breakdown of your paycheck, where 50 percent goes to essential bills, 30 percent for general spending purposes, and 20 for saving. I rearranged the rule by cutting down my personal spending to only ten percent and 40 percent went to my savings. Cutting down personal spending is the hardest part, but it’s also the most important. You know what your average spending is when it comes to rent, food, insurance, however it fluctuates with personal spending. Also, saving doesn’t have to take away from spending money to look and feel your best. A method that helped me was planning my purchases in advance. If I saw something I wanted I would put money aside for it, that way I’m not disrupting the process of saving. Discipline yourself by setting your paycheck to automatically take out a percentage of your pay to be sent to your savings. If you are someone who struggles with dipping into your savings, open an untouchable savings account, they often charge a fee to take out money, that way you won’t be able to keep tapping. Set up your savings account with a different bank than your checking account.
The last tip may seem silly but hiding your cards, removing your cards from your sight, goes back to if you can’t see it then you’re not tempted. To be quite transparent, being quarantined aided a lot, nonetheless, you can still save whatever amount you want if you follow the steps above. Now we are six months in, I paid off all my friends and family. Three out of four of my credit cards are fully paid off, and my savings accounts are growing. So you can definitely do it! Happy saving.