The New and Improved Way to Save Money

Picture this: You’re in line at Target, ready to check out—and somehow you have a cart full of stuff when all you came for was toothpaste and face wash.

You know you don’t really need all those other things, but the yoga pants, flower socks, hair wrap, and holiday table linens were just too cute to pass up.

So you check out and end up spending $150.

Then you feel guilty because you know you should be saving that money instead of spending

it.

Sound familiar?

Chances are, if you’re like most modern working women, you know you need to save money

for the future—yet somehow there’s never any money left at the end of the month.

So instead of constantly beating yourself up for not saving every month, learn this simple approach and then spend money guilt-free—a win-win solution.

The old way of managing money

every month was to pay your bills, spend your money on fun things like going out and shopping, and then save whatever was leftover.

Old Way: Save What’s Left Over

Net Income (after-tax income)

-Bills

-Spend money on fun things

=Save whatever’s leftover

This approach never works long-term.

It’s just too hard to save money at the end of the month when we live in a world of immediate gratification.

So stop making it so hard.

Simply shift your mindset and follow the new approach to managing money: The “Pay Yourself First” strategy.*

New Way: Pay Yourself First

Net Income (after-tax income)

-Bills

-PYF Savings (Cash cushion, retirement, travel goal)

=Spend money on fun things (guilt-free!)

Automate your savings so they’re just like another bill that you must pay every month.

After you pay your bills and  Pay Yourself First, you can spend the remaining amount of money on whatever you want, guilt-free.

If you want to go to Target and spend $150, go for it. Or maybe you want to buy that new designer bag that costs a lot of money.

Do it.

You may have to eat ramen noodles the rest of the month, but at least now you’re being a smart, financially wise woman who is saving first and spending last.

Of course, you can’t spend more than what’s left over every month, otherwise, you’ll be creating debt–and we know that’s not good.

How much should I be saving?

A good rule of thumb is to save 10-20% of your net income toward your top three financial goals for the year.

However, if that’s too much for you, start small.  Maybe start with 3% and work your way up by increasing the percentage by 1% every six months until you reach the desired level of 10-20%. 

Take Action

This approach sets the foundation for your financial success long-term.

It makes it super easy for you to save money and not feel guilty about spending what’s leftover.

So now it’s your turn.

Work on setting up your Pay Yourself First strategy and start saving the easy way.

Set up automatic savings toward at least one of your financial goals today.

This could be as simple as putting $50 per month into your savings account to build your cash cushion.  Or it could be contributing $100 per month into your Roth IRA.

Whatever it is, just make it automatic.

You’ll be surprised at how you won’t even miss that money once it’s automatically deducted.

4 Savings Methods That Really Work

When it comes to saving money, there’s no one-size-fits-all.

We all have different lifestyles, incomes, and preferences. This means the ways we save as well as our abilities to do so, are completely different.

If you have yet to find a savings method that works for you, here are four winning ideas you can try:

1. Save a certain percentage of your income

Saving a percentage of your income is a strategy often used for retirement savings — but it doesn’t have to stop there.

This is a particularly good method for those of you who receive a variable income. Instead of committing to saving $50 per paycheck (and falling short every time your pay dips), you can instead save a certain percentage of your take-home pay.

By doing this, you won’t feel like a failure for not being able to keep up with your intended plan.

Plus, if you’re working on more than one savings goal, you can easily break down your contributions by percentages. For example, you can put 5% towards a down payment, and another 5% towards an emergency fund.

2. Save a set dollar amount

Second, on the list, we have a very popular method of saving a specific dollar amount in a set time period. This method is used frequently because it works and can easily be automated.

Unlike saving a percentage of your income, with which you have to manually calculate your savings, you can save a specific number in a “set it and forget it” type of way.

Saving a set dollar amount each week/month/pay period also works particularly well when you’re running on a short deadline. For example, if you need $6,000 in exactly one year, you know you have to save $500 a month to reach your goal.

3. Save the (virtual) change

Throwing loose change in a jar has always been a common way to save. But now that a lot of money comes electronically, saving your change isn’t as powerful.

To save your virtual change, you’ll need to round up the purchases you make on your debit cards to the next dollar amount, then put the difference in a savings account.

One of the big banks (Bank of America) has started offering this “save the change” feature as one of its perks. Hopefully, more banks get on board with this, as it’s a great way to save if you’re on a tight budget.

4. Participate in a savings challenge

Sometimes, you just need a good ol’ challenge to help you get into the swing of saving. Lucky for you, there are plenty of money-saving challenges for you to try.

Here are a few:

• Saving all of your $1, $5, or $10 bills
• Saving every bill that’s older than you are
• The 52 Week Challenge: Saving $1 for each week of the year (e.g,. $1 for week one, $2 for week two, and so on. In one year, you’ll have accumulated $1,378.)

We all have different preferences when it comes to personal finances. If you haven’t found a money-saving method that works for you, experiment. Keep trying different methods until one click.

What’s your favorite method for saving money? Have you tried any of the ones above? 

Source: 4 Savings Methods That Really Work