If you are anything like me, you tend to blow through your cash as quickly as it comes in. Its very easy to order out food or hit the bar for one or two drinks with friends whenever the opportunity arises. Before you know it, you're out of cash and returning bottles in order to scrounge up gas money for the few days until payday. You are only young once, and it is very easy to get caught up in a sort of, "keeping up with the Jones," lifestyle. This post will provide some useful tips on forming a mental framework so you can avoid living paycheck to paycheck and start to build a nest egg.
Step #1: Track Your Expenses...All of Them.
This may seem like a no-brainer, but make an effort to keep track of every single cent you spend for a month, even a pack of gum or $0.99 beverage at the convenience store near your home. Being aware of exactly where your cash is going each month will really give you a great barometer as to what is necessary spending and what is frivolous (now exactly where something falls in those two categories is entirely up to you). Keeping track to the penny also will make you more conscious of where your finances are at any moment, you'll know exactly how much of your available cash will go towards a potential purchase, which may lead you to pause and reconsider the purchase. Keeping track can easily be accomplished using a free template of a monthly budget in Microsoft Excel or any other spreadsheet software, making your own custom budget within a spreadsheet program, or by linking your bank account to a free budget service such as Mint (https://www.mint.com/). It will be hard at first to be diligent in getting receipts for each purchase and ensuring you update your expenditure list, but after a week or two it will be an ingrained habit. Be sure to track both your fixed costs (rent, cable, Netflix, gym membership, tuition, etc.), as well as variable costs (groceries, utilities, cash spent at the bar, etc.) Do this for a month, then proceed to step two.
Step #2: Analyze Your Data From Step One
Now that we have all this great information of exactly where all of our money goes each month, lets dive into it and see what it tells us. The data will allow you to see where you can, "trim some fat," from your budget. Perhaps you are eating out more than you thought, or your mid afternoon iced coffee pick-me-up is taking a bigger chunk of your cash than you thought. When you figure out where your budget could stand some trimming, start to make a plan to use less money in the category(s) you feel are too much of your budget. Decide on an amount, either straight dollar amount or percentage, of your income that you feel should be allocated to each category. Use your allocations to set up a budget of a month where you follow your desired allocations 100%, and compare your spending to that budget to see where you are excelling, and what areas need some work. Still keep track of all expenses as you go., and move on to step 3
Step #3: Enact Your Plan
Use the goals you set and start moving your spending toward your desired allocation. Don't go crazy, if you go from eating out six times a week to zero times a week you are going to hate it and will likely lapse back into old habits. Saving money is more of a marathon than a sprint, so build up over time. Perhaps cut out one meal a week or at the very least switch to a cheaper item or restaurant and slowly get to your desired allocation. If you feel you can handle it, try to trim every category simultaneously. If you think that might shock your lifestyle too much, just focus on one category at a time, whatever is more comfortable.
Step #4: Reward Yourself Occasionally
Don't forget to treat yourself occasionally. Living a completely spartan existence where you never indulge in any of your favorite things would be terrible, don't be afraid to splurge every now and again. You must ensure you keep logging your expenses, however, lest you slip into old habits. A method I use when splurging is to take my hourly wage and use it to see an item's cost...i.e. if I make $12/hour after tax, and an item's cost is $36, I ask myself if the item is worth being at work for three hours. If I would do my job for three hours and be happy if I received the item as payment rather than cash, then I buy the item. If I would rather have the cash for working instead of the item, I decide to wait to buy it. this method has helped me cut down on my spending tremendously.
Well there is my short primer on figuring out how to save some cashola, feel free to add your strategies sin the comments!
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