Saving money is vital, but the majority of working Americans are living paycheck to paycheck, or they’re facing massive debt from student loans and other responsibilities that prevent them from saving as much as they’d like to … if anything.
The main obstacle isn’t a desire to save, but more the perception of an inability to save. You need strategies to save money for when you feel that you literally can’t … and believe it or not, those strategies exist.
The Importance of Saving … Even a Little
Most people recognize the importance of saving. They know that having a stash of available capital is crucial in the event of an emergency or other unplanned expense, and that investing money in the right ways can create a passive stream of income.
The barrier of thought is usually the idea that in order for saving to be effective, you have to save a ton of money. In reality, even a little savings can be effective.
A few months’ worth of living expenses to serve as an emergency fund is all you need for that extra cushion. And investors like Tim Sykes have been known to turn as little as a few thousand dollars into millions with wise investment choices.
In other words, just a little bit of saving can ultimately take you a long way, especially if you stay consistent.
Strategies to Scrimp and Save
Here are six strategies you should use to save more money:
- Focus on your debt. The longer you wait to pay your debts, the more money you’ll end up spending in the form of interest. Even small-interest loans, such as student loans at between 4 and 5 percent, can end up costing you tens of thousands of dollars — or more — in interest if you only make the minimum payment. As a first course of action, focus on eliminating these restrictive debts, then you can turn your attention to building up a reserve of cash for emergencies and unplanned expenses.
- Stash your windfalls. Whether you realize it or not, you receive windfalls on a regular basis. They might be gifts for various events or achievements in your life, inheritances, or even tax refunds. These are unplanned sources of income, which means they have no bearing on your current budget. It’s tempting to spend this money on what you need, but theoretically your primary income should be able to handle that. Instead, stash your windfalls away. You’ll be glad you did.
- Plan your meals. Eating at restaurants, even fast food joints that appear deceptively inexpensive, can run into a lot of money. Instead, plan ahead, buy groceries, and cook your own meals. The groceries you get at the store will be cheaper, far healthier, and probably far more tasty than what you get at a restaurant. You just need to take a little initiative and plan on a little extra time for preparation.
- Avoid driving. This isn’t a strategy everyone may be able to incorporate, but for people who live in a major city or close to their work, it’s an excellent option. Cars are expensive: On top of their initial price, they involve spending for gas, insurance, and maintenance over time. So why not opt for a more affordable form of travel, such as riding your bike or taking advantage of public transportation?
- Most wealthy individuals will tell you the secret to building wealth is living below your means. That means choosing a living situation that costs less than what you can afford, rather than trying to arrange one that fits your income precisely (and, more often than not, missing the mark). For many Americans, this would mean downsizing to a cheaper neighborhood and/or a smaller living space. Sell the things you don’t need, and simplify your lifestyle as much as possible. Cut expenses whenever you can’t justify them as being absolutely necessary.
- Always look for more affordable options. You’ll pay for a lot in this life. Starting with your rent and your transportation, and extending to groceries, repair costs, medical expenses, and household supplies, as well as entertainment. Whenever you shop for something, always make an effort to find a cheaper alternative (and think long term here). Do some research — information is always free online — and see if you can hunt down a better deal. You could save yourself thousands of dollars a year with this simple strategy.
These six tips won’t make you a millionaire overnight, and they have to be applied consistently if they’re going to work for you. However, even if you’re living paycheck to paycheck, these tactics can help you build up a financial cushion for yourself, and eventually a nest egg, which will put you way ahead of the vast majority of the population.