Making payments on your loan comes with multiple benefits, and it is normal for questions to arise during the process. While making payments on your loan, you may have wondered how you can go about saving money at the same time.
On-time payments and saving money both help financial security and increase credit. So, how do you go about saving money? We'll take a look at several ways to help you achieve this financial goal.
The main principle of saving money starts with having an income that is higher than your expenses. Even though you may have had to borrow money in the past, you should aim to be able to save money while making your payments.
Saving money provides financial security for you and your family and can come in handy for unexpected situations. It allows you to take more risks than you normally might not take. It gives you the ability to try new things you may have held off on with a tight budget. Both vacations and retirement require the savings of money.
Having money in a savings account brings you freedom from the stress of everyday expenses. In order to start saving, you need to account for each expense you have.
Creating a budget is a standard tool used to take a look at how much money you have every month for your savings. Having a budget is a way to stay aware of what's coming in and what's going out money-wise. Let's go over some budgeting basics.
First, you need to assess the amount of money you have incoming. This could be from an employer, a side job, or any other source of funds you have. You want this to be your take-home pay after taxes.
Now, you want to add up your expenses and subtract them from your total. This is going to include more than just necessities. This should also include some of your wants, such as entertainment or shopping over the weekend.
A general concept that is adopted by many advisors is the 50/30/20 rule. This rule divides necessities, wants, and savings accordingly. Around 50% of your income should be devoted to necessities. For your wants, 30% is ideal, and 20% will be left for any savings.
This should give you a good idea of how much you should save. If your expenses are too high, you will want to consider removing some of the wants from your budget. Set a goal for what percentage you want your savings to be and adjust accordingly.
We talked about removing some of those wants from the list of expenditures. Some expenses come from things we can afford to get rid of or change. Let's take a look at some of the more common expenses.
Taking a look at your monthly bills, this often includes cable and online subscriptions to streaming services. If you currently have cable, it is a service that many people switch from to streaming services to save money. Streaming subscriptions often include just as many channels at a fraction of the cost of cable.
Or do you have too many online subscriptions? With Netflix, Hulu, Vudu, Amazon, and many more, these can add up over time. If you aren't using a subscription as much as you once did or can manage without it, consider removing it from your list of expenses.
A great chance to explore your cooking abilities and save money at the same time is to cook at home. Home meals, on average, cost around $4 compared to the cost of $13 for a meal from a restaurant. The time it takes to cook a meal is worth the payoff of savings. Americans, on average, spend around $3,000 every year eating out.
In your home or apartment, there are some simple things like turning lights off or adjusting your thermostat that can significantly reduce your power bill.
Budget billing is also an option that most power companies provide a set monthly amount billed based on your past usage. This allows you to be aware of your monthly expense and plan accordingly instead of having a fluctuating bill in the winter and summer months.
Whether it's home, auto, or cell phone insurance, it is worth calling your current company and negotiating better terms. Oftentimes people let their current rate renew every year without any reconsideration. If you haven't had many claims, you may be eligible for a reduced rate compared to your expense the previous year.
Compare rates with other companies. Many companies provide online quotes that you can use for comparison to what you are currently paying. It may be time to switch; make sure the coverage you are getting is adequate to suit your needs.
If you are willing to put in some effort searching, you can often find discounts on the things you purchase every day. Many companies have made hunting for coupons and savings on the internet easy.
Take a look at the companies you normally have expenses with and shop at. You can check if they have a rewards program or something similar that you can join. These often give you extra savings for being a member or cashback for your purchases. The cost of being a member is often worth the expense if it saves you more in the long run.
When considering making bigger purchases on things you need, there are many online forums to consider first if you are willing to buy used. Facebook Marketplace and OfferUp allow you to connect to people in your local neighborhood that sell used items, such as electronics and appliances, at a fraction of the cost of new ones.
Shopping at thrift stores such as Salvation Army and Goodwill can be a great way to save money on common household items and clothing.
Paying off your debt earlier than the standard due date is a great way to begin your journey to saving more money. This may cost more money in the beginning, but it pays off in the end.
Paying off your debt is more important than focusing on how much money you are saving every month. The earlier you pay off your debt, the more money you can save by not paying all the interest you would if you were to let a loan mature in the planned time frame.
Focus on the highest-interest debt, such as credit cards, first so that these bills will be behind you. This will allow more money to be put into savings after you eliminate paying any expensive interest.
To use this approach, you want to make sure that you have enough savings allotted to your emergency fund first, just in case something unexpected pops up in your life.
Are you more focused on the short-term or long-term when it comes to your goals? Depending on what your goals are, you should focus on different areas.
For more short-term goals, like saving money for Christmas presents or for a vacation in a couple of years, a simple savings account can be satisfactory, giving you a specific place to place your money every week or month so that you have it set aside for when you need it.
Another option to look at through a bank is a Certificate of Deposit (CD). This option takes the money you currently have and gives you a fixed interest rate of growth. This way, you know what to expect at the end of the time period.
For more long-term goals such as retirement, you will want to investigate options such as a 401(k) or IRA. These are tax-efficient options for savings in the future. Stocks and mutual funds can also grow your savings account over the long haul.
With some investments being more reliable than others, keep in mind the risk involved when investing. Use a broker-dealer to assist you in the process to ensure your full understanding of how your money will be used for long-term savings.
What better way to be able to save more money than to have more money coming in every month? Having extra income gives you more money to put into different areas of your life.
You can increase spending in the “wants” area, but more importantly, can save more every month if you choose to do so. What are some ways to bump up your income potential? Here are some common ways.
Side hustles are becoming more common for people with extra time outside of their regular employment to explore extra income sources. There are many different ventures you can explore, but here are some popular methods of side hustling to consider:
Does your career satisfy you and provide you with the income you need to meet your budget? If you feel as if you are worth more at your current job, there is always the option of asking for a raise. Note your achievements and areas of success to your employer to justify your need for additional pay.
Maybe it’s time to pursue a career in a different field that suits your skills and compensates you beneficially at the same time. This can be achieved by enrolling in college and getting a degree if you haven’t done so yet.
If you have the time and energy, getting a part-time job, just like a side hustle, is an option to consider if you are that serious about increasing your monthly savings.
Repaying loans can require you to look at your current loans and consider the possibility of refinancing them. Refinancing your loans starts with looking at your credit score and seeing if it has improved over the time of your loan. Knowing your score can provide you with the knowledge of knowing where you stand as you go into the refinancing process.
We’ve talked about some different ways to get you on the right track toward saving. To make saving money easier for yourself, there are some things you will want to avoid in the process.
When it comes to saving money, the concepts are fairly basic. Every technique and piece of advice generally falls within the areas of cutting expenses or increasing your income.
While you are trying to achieve your savings goals, make sure those goals are achievable and don’t leave you feeling as if you don’t have the funds to do the things you want to do in your spare time.
Focus on your short-term savings goals first, and then focus more on the long-term. Find a balance of different means to support your savings goals, planning for today's unexpected and the future's retirement.
Following the guidelines you determine through a budget will guide you to a successful savings plan. Keep your budget updated with new expenses and income changes to stay on top of accomplishing your goals.