advantages of saving money

How Do You Develop A Financial Strategy to Stay Out of Debt and Save Money

April 2, 2020 By Tamila McDonald 2 Comments

Total U.S. household debt hit $14.15 trillion in the fourth quarter of 2019. Based on a population of nearly 330 million, the average owed per person (including infants and children) is a startling $42,879. Many households struggle to get their debt under control. They may have issues making payments and get stuck living paycheck to paycheck. Making their savings goals a reality may seem impossible, leaving them scared and frustrated. If you want to live your best life, developing a financial strategy that keeps you out of debt is a must. If you don’t know where to begin, here are some tips.

Make and Follow a Budget

Having a clear, defined budget is critical if you want to avoid debt. It allows you to outline your expenses and gives you a way to set spending limits. Plus, you can allocate a certain amount to savings, which is a critical part of staying out of debt.

If you don’t have a budget, create one immediately. Tally up your income, list all of your debt payments and living expenses, and add a line item for saving. See how much you have available after covering those necessities.

If your income falls short, you may need to explore ways to cut back. If you have a surplus, then consider how it can be best used. You could bolster your savings, pay down debt, or otherwise find ways to ensure your financial well-being.

Get an Emergency Fund

A buffer is critical if you want to avoid debt. Without an emergency fund, you might have to turn to credit cards or loans to handle the unexpected. That isn’t ideal.

Begin by socking away at least $1,000. Usually, that amount is enough to cover home or auto deductibles, for a start. It can also handle many smaller emergencies, like a flat tire, trip to the doctor, or major appliance failure. You’ll have a safety net that you can use for those costs and replenish much more quickly and easily than if you were repaying a similarly sized debt.

Once you have at least $1,000, you may want to shift your attention to paying down high-interest debt, if you have any. After you square that away, work to stash three to six months of living expenses. Usually, that’s a sufficient enough cushion to weather even a severe financial storm.

Consider Going the Cash-Only Route

One of the benefits of using cash is overspending isn’t an option. The money in your pocket, purse, or wallet is all you have available. Once it’s gone, you can’t spend any more.

The cash-only route allows you to ensure you stick to your budget. You can pull out cash for each of your spending categories, like groceries or gas for your car. Next, place that money in envelopes designated for each purpose. When you make an associated purchase, use cash from the corresponding envelope.

Using cash can make your spending feel more real, essentially increasing your awareness of what you’re handing over and what you’ll have left. You might make smarter choices, as a result, and that can make a big difference long-term.

Plan Ahead for Large Expenses

Your emergency fund can become a sizeable cash stash, so it may be tempting to use that money for large expenses. But that isn’t the purpose of an emergency fund. It’s there to handle the unexpected, not what you know is on the horizon.

Whether you want a new television, will need to replace your roof, or intend to buy a car, make the cost part of your financial plan. You may want to create dedicated savings accounts for each one. That way, you can deposit into them regularly and build up the amount you need.

This approach essentially supports a broader cash-only lifestyle. Avoid making the purchase until you have the full amount, ensuring you don’t need debt to cover the cost. At a minimum, if an expense genuinely can’t wait, you can use what you do have stashed to lower how much you need to cover with debt. That can reduce your long-term financial obligation, making it easier to rid yourself of that debt as quickly as possible.

Do you have tips for developing a financial strategy that can help people stay out of debt? Share them in the comments below.

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7 Great Ways To Save This Coming Year

February 28, 2020 By Susan Paige Leave a Comment

Obligatory photo of dollars being stretched.

It is sometimes overwhelming how people tend to be a lot more conscious of themselves when the year ends and be a little cautious as the year starts anew. When you are looking at your finances specifically, you would be thinking about ways on how you would handle or change your spending habits or things that you start implementing to save and meet some of your financial goals.

Read on below the seven great ways to save money this coming year to walk you through different saving tips and help you with your financial management;

1. Change Your Mindset

If in the previous year you always felt like you can’t have fun without spending money, then you have to change your mindset. Come up with fun free activities or very low-cost activities to do. There are so many things you can do that don’t cost very much like cheap date nights, free date nights, free stuff with your kids, (if you have kids).

You don’t always need to be spending money to have fun and to go out and do things. Instead of thinking about how you can enjoy now, why not think ahead and consider your future and whatever your goals may be.

Once you have really changed your mindset and you’ve dug deep and figured out that you want to save money, you want to stop unnecessary spending and start saving for your goals.

2. Look For Coupons Online

Before you hit that check out button online, it is recommended to search google or sites like gopromocodes.com, whether there might be any coupons around. Because sometimes, especially for certain holidays, some online stores have specific promo codes like for Christmas, Labor Day, Memorial Day, and the like.

There are coupons available all year round, and you’ll never know if you don’t check. Especially if they have a newsletter, try to sign up and they might even send you some coupons. The saved cash would go a long way considering that you still have taxes and shipping fees to pay in your order online.

3. Cancel Unnecessary Subscriptions

Subscriptions such as your beauty boxes updates, streaming subscriptions, gym subscriptions, and things that interest you are hard to resist. Plus, considering that it is just five dollars a month, that would be easy for you to hit that subscribe button and add your credit card details. That’s plain and easy until it all adds up, and sooner or later, you have all these subscriptions for things you don’t need.

Look at all your finances, start breaking everything down and attend to what subscription you are not using and what does not fit in the money that you have. From that, start unsubscribing from all of those memberships.

It doesn’t mean that you would have to cut out your subscriptions forever, but specifically, if you are trying to pay off debt, things like a beauty box subscription and the likes are not a necessity. Once you are debt-free, you can re-evaluate and see if that subscription that you want can be added in again, given your budget.

4. Save Before You Buy

It is indeed alluring to visit online sites and hit those buy now buttons, but what you want to do if you wanted to save some money is to think about your purchases before you make them. Instead of making a rushed decision in buying, why not plan for it, and save for it in advance.

5. Use Cash

Using cash is a game-changer as far as day to day spending is concerned, for it keeps you on track of your spending. Furthermore, using cash is more emotional, for you will be thinking about the purchase more rather than just stacking everything on your cart and swiping your credit card when you got up the cash register.

6. Have Something To Remind You Of Your Goals

If you are serious about saving money, why not keep something that you really want, or more like a picture of what you’re saving up for in your wallet.

Maybe put it as your lock screen on your phone or have it framed at your bedside. Doing so will always remind you that you are trying to save up for something and probably make you rethink every time you want to buy something that would compromise your saving plans.

7. Pack Your Own Food

Whether at work or school, it is always a good idea to pack your own food. Try to imagine what will happen if you don’t have a packed lunch and you get hungry. If you have some extra cash in your wallet you’re going to spend it on maybe, a vending machine if you are in high school or perhaps you’re going to go and eat out.

Lunch may cost around $8 and imagine if you’re spending $8 every single day even if it’s just for four days it’s going to add up. That money that you are paying for food could have gone through whatever you’re saving for.

Conclusion

If you want to buy something and aren’t able to do so, it makes you frustrated that it continually reminds you to save money. Never let yourself suffer the same frustrations again by taking the seven helpful ways to save money mentioned above, thoughtfully, and stick to it. If followed these ways diligently, you would never have to worry about not having that thing or goal that you have for you are confident that you have the money, you worked hard for it, and had saved for it.

For more great saving money articles read these:

Take the 365 Day Money Challenge

Take the 52 Week Money Challenge

Twenty Money Saving Duct Tape Uses

Image source: Pictures of Money, via Flickr

Savings Tip: Cutting Down on Monthly Spending

October 16, 2019 By Susan Paige Leave a Comment

Without a proper budget and financial plan, it’s easy to spend out of your means monthly and find yourself in debt without even realizing it. Expenses can add up quickly, and you may end up spending more than you are making.

There are plenty of great methods to cutting down monthly spending that may be worth looking into when you find yourself needing to save money.

Get Some Extra Income

If you found that after creating your budget you do not have extra money to cut down on, another viable option is to get another part time job. This can be reselling clothes on a resell platform, or driving for a ridesharing app.

If you find yourself with some extra hours on the weekend, you can make some extra money to cover extra expenses! Getting a part time job bartending or waiting tables on the weekends could really potentially supplement your income, even if it is just a few extra hours during the week.

Another excellent option for getting an extra influx of cash is taking out a loan, specifically a title loan. This type of loan can let you keep driving your car while you pay off the loan and have some extra money for your budget.

Calculate What Your Spending Habits

Most people love to drink coffee in the morning. Whether it be from a big coffee chain like Starbucks or a tiny little café on your way to work, coffee expenses can add up quickly, and you can be spending over $185 a month on espressos alone! This can be an example of spending outside of your means.

One of the ways to manage your spending habits can be tracking your spending habits. An easy way to do this can be keeping a spreadsheet in your phone and recording what you spend, as well as tracking your automatic debits for more accuracy. Every time you go out to eat, or pay a credit card bill, mark it in your expenses category that matches what type of expense it is!

Create a Realistic Budget

When you find yourself in a financial pinch, sometimes one of the best steps can be creating a budget to understand your financial situation. The first step to creating a realistic budget it to start tracking your monthly expenses. Then, you can separate the expenses into two categories:

Fixed Expenses-These are expenses that do not change from month to month. They can be items like mortgage payments, rent, car payments, or utility bills.
Variable Expenses– These are expenses that will change from month to month. These are generally items like gas, eating at a restaurant, groceries, and entertainment.

By separating your monthly expenses into two categories, you are able to track what money you can save by seeing where you are overspending. If you are spending too much in your fixed expenses, consolidating bills or debt may be your answer.

If you are spending too much in the variable expenses, you may be eating out too much and need to start taking your lunch to work.

Get Control of Your Finances

With the right financial plan, you can get in control of your finances and help cut down on your extra spending!

For more on this consider reading our articles on:

The 52 Week Money Challenge

The 365 Day Money Challenge

The 52 Week Mega Money Challenge

Image source: Pixabay.

The Pros and Cons of Saving Money ‘Under the Mattress’

March 22, 2017 By Pauline Paquin Leave a Comment

Should you be saving your money under the mattress, or trust a bank to handle your cash? While technology has made banking easier than ever, keeping some cash under the mattress can also come handy, and with the economic uncertainty, many people have lost faith in financial institutions. Let’s have a look at the pros and cons of saving money under the mattress.

Why you should save money under the mattress

Saving money in a bank account does have its downfalls. Of course you get interest but you don’t get these perks of saving money under the mattress:

Convenience

Whether it is metaphorical or not, keeping your cash “under the mattress” means it is readily available at your house. If you live far from an ATM and have a need for cash to pay for produce at the farmers market, or give the kid who mows your lawn, it makes sense to have more cash reserves than the urban dweller.

I live an hour away from a bank for example, and try to go to town every other week, so keeping cash at home is the norm. You don’t want to spend $5 worth of gas to withdraw $20.

Free access

Don’t you hate ATM fees? They are so annoying. Most banks will charge you a fee to access your cash outside of their ATM network. It is usually a dollar or two, although when you only need $20, that is a hefty price to pay to get back the money you’ve been lending the bank for free. Keeping money under the mattress can save you a bunch in ATM fees.

Emergencies

Keeping cash under the mattress also has you covered in case of an emergency. If you need to leave suddenly to help a family member in need, you’ll save yourself a trip to the ATM. In case of a power outage or other extreme emergencies that may prevent the ATM from working, you will have reserves to buy food and other vital necessities while it lasts.

Peace of mind

When I don’t have cash, I feel uncomfortable. You surely can get by with your credit card and navigate almost everywhere, but sometimes you will end up in a cash only situation. Worse, if you are with friends and unable to cover your share! Keeping a little bit of cash handy will ensure you are always ready.

Saving money under the mattress has a cost

Now that you know the pros of saving money under the mattress, there are also some cons you should be aware of:

Interest

The main advantage of keeping your cash at a bank is you can save and invest it, whereas keeping money under the mattress doesn’t earn you any kind of interest. How much are we talking about? Well, if you keep $2,000 in cash for most of your adult life, instead of putting it in a 3% saving account, you will pass on $2,919 worth of interest after 30 years. That number gets bigger if you invest your $2,000 and get higher returns. Not allowing your cash to grow and compound can delay your retirement plans by several years, so you would have to work longer.

Furthermore, every year inflation will erode the value of your cash. That means next year, you won’t be able to buy as much as you used to with your money. Having it earn interest, even with the low rates of saving accounts these days, will help you at least keep up with inflation and not lose money.

Safety

Unless you have a safe at home, if we are talking about literally keeping money under the mattress, you are making it easy for anyone entering your house to access your cash. And I am not just talking about burglars. It could be your kids reaching for a $20 bill when you refused to give it to them. Or their friends accidentally finding your secret stash while playing hide and seek. As long as the money is in the house, it will never be 100% safe.

Logistics

Until I got a safe, I found myself counting my cash too often, worried some of it might have disappeared. I had times of doubt, where I couldn’t remember if I had spent it, or if it had disappeared. And because I had several hiding places, I even forgot about some of them, and then found the cash a few months later. It is a messy system. If you are going to save money under the mattress, at least keep a record of how much you have and where.

Convenience

As mentioned above, I am quite a messy person. And when I use cash only, I have no idea how much I spent, or where the money went, which makes it hard to track my expenses. Using a debit or a credit card instead is so much easier. You just swipe it, and your bank sends you a neat statement, telling you how much you spent. You can export the data into a budgeting software like Mint, and it will order it and make some awesome pie charts about your spending. You can challenge a transaction and get purchase insurance.

When using a credit card, you do not need to carry coins and bills, which are bulky and dirty. One card does the job. You are also missing out on cash back and rewards offered by credit cards if you go cash only.

While there are definitely some advantages to saving money under the mattress, keeping too much cash in your house can be dangerous, and the lost interest can have an impact on your total nest egg in retirement. So you should keep a small sum, and invest the rest to make your money work hard for you.

This is a guest post from Pauline of InvestmentZen.com

Photo: Boston Magazine