2011 is quickly approaching and this time of year, many Americans make New Year’s resolutions or goals to achieve during the following year. Some popular resolutions include losing weight, quitting smoking, or spend more time with friends and family. Perhaps one of the most popular resolutions this year is to save money. With many Americans out of work and short on cash, saving for the future can be more difficult than ever. Many have a hard time saving well for others it comes naturally. Saving money each month is a lifetime habit that one must learn to form. For many, saving money is difficult because it seems as if every dollar that we earn funds away to become spent by the end of the month. While this may seem to be the case, saving money is achievable for just about anyone as long as you live within your means.
There many websites online that can give you some ideas on how to save money. Here are 16 great tips from the website zenhabits.net:
1) I cut my own hair. I bought a $20 buzzer, and it lasts about a year. I used to get a haircut every month, at a cost of $20 (including tip, not including gas money to get there and valuable time spent there). So I save the cost of about 11 haircuts a year. I do the same for my three sons, saving another 36 haircuts (at $10 each). Annual savings: $580.
2) No Cable TV. We watch DVDs, or read. I don’t spend much on DVDs either (probably less than most people, per month). Cable costs about $65/month. Annual savings: $780.
3) Became vegan. I eat a lot of fresh fruits and veggies, which are expensive, sure, but you are supposed to eat those whether you’re vegan, vegetarian or a carnivore, so I don’t count those as extra expenses. The real comparison is between meat, and the protein substitutes I use. Most of my protein comes from tofu, although I do eat beans and soy protein such as fake ground beef or soy burgers. Overall I believe I save about $2-3 per day not eating meat. Annual savings: $900.
4) Don’t use the gym. I used to be a member of a gym. Didn’t use it much, and still got charged for a full year. Now I get a lot of exercise, but I do it at home and on the road. I do strength exercises in my living room and jog (and will soon start cycling and swimming). Annual savings: $420.
5) Rarely go to the movies. I used to go out to the movies at least once a week, and sometimes more. I slowly made it every other week, and now I don’t even go once a month. Now we take the kids to the park or out to do something more fun and creative. I figger this saves me at least $15 per week, although it’s probably more when you factor in the cost of my kids’ tickets, and concessions. Annual savings: $780.
6) Quit smoking. I quit over a year ago. I smoked a pack a day, plus a soda or tea or coffee to go with the cigarettes, at a cost of about $5 per day. Annual savings: $1,825.
7) Don’t drink much. I never did, really, except maybe in college. But for some people, drinking is a major expense. A beer or two a day can add up, and for the sake of these calculations, I’ll count it. Annual savings: $800.
8) Never go out. I don’t go to clubs, or the theater, or ballet, or opera. I guess I’m just not that type of person. Annual savings: maybe $500.
9) Stay healthy. As mentioned above, I’m a vegan, a runner, and I don’t drink or smoke anymore. I never go to the doctor, and if I keep up this lifestyle, my likelihood of getting the most common diseases are greatly lowered. Annual savings: probably $1,200.
10) Don’t go shopping. We used to hang out at the mall a lot. It was convenient, and had a lot of great stuff to look at, and a food court. The food court alone costs $30 for us, and if we bought stuff that would be another $25-75. Cha-ching. Now I rarely ever, ever, ever go to the mall. I hate it anyway. I only go to the mall or Kmart if I need something, and even then I try my best to avoid it. Annual savings: probably $2,600.
11) Have only one car. We are a married couple with six kids, soccer practice, choir, school functions, many many family gatherings, running events, martial arts, and much more. But we get by on one car. We are looking to get a used van with better fuel economy, and I am going to start commuting at least a few times a week by bike. Annual savings: unknown, but perhaps $5,000.
12) Bring my own lunch. My co-workers eat out every day, at a cost of $8-20 per lunch. I bring leftovers or a sandwich and fruits and pretzels and stuff. At a cost of probably less than $5. Annual savings: $1,800.
13) No magazine or newspaper subscriptions. I used to have the paper delivered. Now I read it online or at work. I used to subscribe to 1-2 magazines. Now I read the Internet. Annual savings: $360.
14) Rarely buy new clothes. I use my clothes and shoes until they are threadbare. Really. Ask my wife and kids. Annual savings: maybe $400.
15) Never travel. I would like to travel. When I am out of debt and my savings accounts are nice and healthy, I will travel. But for now, I skip it. Others I know take at least a trip per year. Annual savings: $1,500.
16) No more lattes. I used to get a latte every day. At a cost of about $4 per latte. Sometimes I’d get two. Now I make my own coffee. Annual savings: about $1,000.
There are more little ways that I’ve learned to save, like getting my books at a used book store, cooking most of my meals (aside from the above-mentioned lunches), power-saving measures, no long distance calls. There are also ways I can still save, including eating out less (we eat out 1-3 times per week, mostly fast food like pizza or Taco Bell or Wendy’s, all of which I can do without).
Estimated total savings: $20,445.
Saving money each month for starts by knowing and understanding how much money you have coming in and how much money you have gone out. To get started, sit down and think about all of your reoccurring monthly expenses. An examples of reoccurring monthly expenses may be your rent, phone bill, car insurance, or car payment. Perhaps the first thing that you can do is go through your list and determine exactly what is necessary and what is not. Are you spending $50 per month on a gym membership that you never use? Are you not using all of those features on your cell phone plan and can downgrade to a lesser package? Providers such as straight talk wireless offer 1000 minutes nationwide for $30 per month. Are you currently subscribe to service such as Netflix and are not using it? Perhaps the easiest way to save money is to remove unnecessary expenses.
Once you have sorted through all of your monthly recurring bills, you will now want to consider items that will vary from month to month. Examples of these items may be food costs, entertainment costs, or even automotive expenses. Create a reasonable budget for each category. Here are a few tips for creating a budget from bankrate.com:
Follow the money: Track your spending
The first step to developing a budget, says Tehan, is to track your expenses for at least a month, using a checkbook ledger, a sticky note inside your wallet or a Bankrate daily expense work sheet. Be sure to record every purchase no matter how small, including ATM fees.
“Once you know where your money is going, you can make an educated decision about how best to allocate your money,” he says.
Many novice budgeters make the mistake of becoming too financially conservative, at least on paper.
“The No. 1 rule of setting budgets is to not cut all the fun out of your life. Inevitably, Spartan budgets that have no allowance for entertainment are doomed to fail.”
Instead, learn to moderate. “If you’re eating out every night, and that’s something you enjoy doing, try eating out once a week instead,” says Tehan. “It’s not about cutting out everything that gives you joy in life. It’s about better allocating your money.”
Make savings contributions automatically
Though every budget scenario is different, Curt Weil, a Certified Financial Planner for the Lasecke Weil Wealth Advisory Group in Palo Alto, Calif., says a good rule of thumb is to allocate at least 10 percent of your earnings toward savings, using direct deposit to pay yourself first.
Tehan agrees. “If you put that money aside before you even see it, you won’t miss it. Direct deposit helps to put your savings on autopilot.”
Short-term savings that you may need to access can be held in an interest-bearing savings account, six-month certificate of deposit or money market fund. Long-term savings, meanwhile, should be directed toward a tax-friendly retirement savings tool, such as an individual retirement account, or IRA, or 401(k).
The ultimate goal, of course, is to maximize your 401(k) , the maximum is $15,500 for 2007. But those just starting out should contribute at least enough to get the employer match, says Weil.
Define spending and priorities
Another 35 percent of your earnings, he says, should be earmarked for housing and utilities. Weil says, however, that homeowners can often up that percentage since principal payments are already a form of forced savings, and the mortgage interest they pay is tax-deductible.
If you’re saving for something specific, such as a new car or your child’s college education, you may want to set aside another 10 percent of your earnings into an interest-bearing account or a tax-favored 529 college savings plan.
Everything else– the remaining 45 percent– is discretionary, for use on food, entertainment, clothing and vacations.
That’s where priorities come in. You can’t have everything you want, says Martin Siesta, a Certified Financial Planner for Compass Wealth Management in Maplewood, N.J., but you can direct your dollars toward things you want the most.
“If consumers start by deciding what’s most important to them, then cutting back on some of the things that aren’t that important isn’t really a sacrifice,” he says.
Pay with cash
One you’ve determined how much to set aside for saving, spending and investing; it’s time to make those numbers stick. The growing popularity of credit and debit cards makes it all too easy to overspend.
With the exception of your mortgage and car loan, most consumers should implement a strict policy of paying with cash for groceries, clothes, vacations and nonessential items.
After understanding your monthly expenses and creating a budget, you will want to examine your monthly income. This step can be quite simple for most people because they know exactly how much they will receive each month in income. For others, estimated monthly income may be a bit more challenging because monthly income a very. In either case, you will want to write down exactly how much you have to spend each month. When creating this number, you will want to consider taxes also.
Now, subtract your monthly expenses from your monthly earnings and write down the number that you come up with. This number represents the amount that you will be able to save each month if you closely follow your budget. For instance, if you earn $2000 per month after taxes and your monthly bills are $1600, you can save up to $400 per month if you closely stick to your budget.
Perhaps the most challenging part of saving money is being able to set money aside and not spend it. This is the main reason why many people have a difficult time saving money. Remember, always pay yourself first before spending any money.