Saving money isn’t intuitive, so it needs to be intentional. How to save money shouldn’t be complicated, yet somehow, most money saving tips we see online tell us that the best way to save money is to simple “spend less.”
I am here to tell you that this money saving method isn’t going to work, and if you walk away from this with nothing else, at least know that sacrificing living life TODAY in the name of the future is a mistake. It is so important to make decisions that will benefit you long-term, but it’s also important to find the balance of saving for the future and living in the moment.
Over the past few years, I’ve really honed my ability to save money and live more, without making it complicated. A huge issue many young adults face is finding the right balance between saving money and making smart financial decisions, while also being able to live life to the fullest and buy nice things.
Most people fall to one extreme on either side of the spectrum; but the most successful people have found a way to balance in the middle. And those are the people who have implemented what I like to call a Simple Saving System for saving money. A Simple Saving System is a strategy for implementing money savings tips into your life!
What is a Simple Saving System?
This is a method for making saving money, simple. It’s designed to enable those who implement it to grow sustainable, long-term wealth through very simple and straightforward financial strategies, tips, and routines.
I’ve broken in down into 3 steps for money saving:
- Saving strategy
- Spending plan
- Signature system
Let’s dive a little bit deeper on these money saving tips:
There are a million different saving strategies floating around the internet, but there is one in particular that has proved to be most successful. It’s the save first, spend second strategy, and this means that you basically pay yourself and put money into savings BEFORE you pay all your bills and spend discretionary money. This makes saving money exponentially easier.
The goal of this saving strategy is to take money right off the top of your paycheck and deposit it into a savings account before you even see it. How can this be done?
If you have a retirement account, either a 401k with your company or an IRA if you are self-employed, you can simply set up an automatic transfer for the money each month before your paycheck is deposited into your checking account. This guarantees you save without any effort. For example, I have 6% of my paycheck directed into my 401k before the money even hits my account. I don’t even see it! That guarantees at least 6% of my salary is going towards savings.
Another way to do this is to calculate how much money you make each month, and simply set an automatic transfer each time you get paid. For example, say you get paid each Friday morning. You can schedule an automatic transfer of a percentage of your income right into your savings account.
Saving first, and specifically cutting money right off the top of your paycheck reduces the risk you spend the money and also makes it nearly impossible to not save. It really is that simple.
The second money saving tip is to put together a spending plan. This is a plan that maps out your spending, your saving, and everything in between. A spending plan becomes a bit more complex compared to simply saving money off the top of your income, but I encourage you to keep it as simple as possible. With a spending plan, you can plan out exactly how much money you are taking in, how much money is going out and where it is going. This includes your expenses, but it also includes your savings and investments, too!
Enter: zero-based budgeting, which is a way to give all of your money a specific purpose. It maps out every single dollar you save or spend, so at the end of the month, you have “zero” dollars left. This way, each dollar is going towards something, whether it be an expense or a savings account, and as a result, you aren’t just saving “whatever is leftover.”
To start building out your spending plan, you can group your money into 3 simple buckets: necessary expenses, savings goals, and lifestyle expenses. Each month, you plan exactly how much is going towards your necessary expenses for bills, and then you can map out the rest towards different savings goals and adjust your lifestyle spending as needed. Grouping it into 3 buckets helps keep it SIMPLE.
Your signature system is how you incorporate your personal finances into your routine. Personal finance really is personal, and how you choose to manage your money should be too. This could include how you regularly check in with your finances, your money routines, and anything in between.
Ultimately, the goal with your signature system is you create a sustainable way to monitor, adjust, and plan your finances so you stick to it. If that means each week you are tracking your expenses down to the cent, then so be it. Or it could mean that twice a month you make a savings transfer and call it a day. I don’t care what it is, as long as you both stick to it, and it works for you!
For me, I use The Personal Finance Dashboard to track all of my expenses and savings. Each week I go into the tool and update my numbers, make any transfers as needed, and move on. It takes me 10-15 minutes, and the best part? It’s SIMPLE.
These three simple money saving tips make personal finance easy, and every millennial needs to know about them! We are often told that money is complicated and there are so many different things we need to do. You can’t do all the things if you don’t have the right foundation in place. Sometimes, the most advanced thing you can do is the basics, consistently. So start with creating your Simple Saving System!
I have a mini-course dedicated to creating your Simple Saving System, and you can access it here.