The most difficult thing about saving money is getting started and finding small ways to save here and there. No matter where you are with your personal finance, anyone can turn the tables by taking the first step in the right direction.
Here are 7 practical personal finance tips you can follow to boost your money savings and secure your financial freedom:
- Create an Emergency Fund to Cover Unexpected Expenses
One of the most important steps of personal finance planning involves taking care of unexpected risks. Apart from creating provisions for health and life, you also need to build a corpus to meet unforeseen financial expenses. Unless you have an emergency fund in place, you may have to pledge your gold or break your existing investments. Doing this will not only jeopardize your long-term personal finance goals but also keep you from leveraging the power of compounding interest. So, make sure you set aside at least six months of your household expense as an emergency fund in liquid assets. You can also split the emergency fund into two by keeping half of it in your money saving account and the remaining in liquid mutual funds.
- Track All Your Expenses to Reinforce Good Saving Habits
The very first step to saving money is to determine your daily expenditure. Keeping track of every single penny you are spending helps you analyze the data and break it down into categories. You can also count on your credit card and bank statements for accurate recording of your expenses. Once you have a clear idea of your monthly spend, you can then organize your daily spend into a workable budget. This personal budget will then enable you to plan your priorities and limit your expenses. Make sure you also consider expenses that occur periodically but not monthly, like car maintenance, home repair, medical expenses, or family vacations so that your personal finance goals stay on track.
- Start Small to Tackle Big Personal Finance Goals
Once you have a personal budget, create a category for money savings and try to put away at least 10-15% of your paycheck every month. If your expenses don’t allow you to put aside even 10% of your income, it is time you cut back on your costs. For you this may need to prioritize your necessities and spend less on recreation and luxury.
- Make a Shopping List and Stick to It – Avoid Impulsive Purchases
Most people spend thousands of dollars every year on unplanned purchases. An easy way to avoid this is to prepare a grocery list and stick to it. Just this one step will help you save as much as 20% on your monthly grocery bills. When shopping for groceries, you can also take advantage of a card that gives cash back rewards if you are confident enough of paying off the balance every month.
- Challenge Yourself to Save by Setting a Yearly Target
You can bank as much as $1,000 in just 3 months if you give yourself a money-saving challenge where you can start by saving $60 in the first week, $75 in the second, 95 in the third and $100 in the fourth week. In the fifth week you can start again at $65 followed by $75 in the sixth week, $95 again in the seventh week and $100 in the eighth. Finally, repeat the pattern for four more weeks and by the end of the twelfth week, you should have saved a thousand dollars!
- Use a Rewards Credit Card to Your Advantage
An average American shopper earns around $600 in card rewards and cash backs every year. You too can make the most of free money by using a credit card that comes with reward programs and rack up the most points on groceries, gas and other frequent purchases.
- Consolidate Your Debt
If you fail to make your credit card payments on time and are being crushed by the high-interest rates, consider consolidating your debt. A personal line of credit can help you meet urgent expenses in a short span of time without needing any collateral. Refinancing brings you the advantage of lesser loan costs and improved repayment flexibility. The best way to get a credit line is to approach a trusted lender who provides instant access to funds so you can break free from the vicious cycle of debt and lead a financially secure life.
If your money savings are suffering a setback, there are several personal finance blogs you can read online to learn new tips and get inspired.