Personal finances management is sometimes as complicated as the company one. It is much more needed to understand how to save money so that it will be easy to control our finances.
Although this subject is taught in many schools, 58% of working Americans still don’t contribute to their 401(k) plan, eight in ten are in debt and in 2014, student loan debt exceeded $1,2 trillion.
Remember art saving money is nothing but understandng how to make money. The purpose of this article is to show how to save money. So that personal finances can be managed in an easy way. We are going to explain this through four areas with which people have most problems with.
4 Areas that describe How to Save Money ?
Making a Budget
Making a budget starts with the first month that will serve as a test to determine total sum required for reaching all financial goals of your household. During this period every expense should be put on paper and in the end of the month you should have complete categorized list of necessary expenses.
Next step is to calculate all the income and determine the ways to earn more funds. Some of the most popular options are: freelancing, part-time jobs, renting real estate, etc. The monthly budget should be based on both income and expenses and it should not be higher than ¾ of household income. This way you will end up with enough money for running savings and investment accounts. This figure is called projected budget since you still don’t know how much money you will actually spend. In the end of next month, you will have the actual budget figure that should be used for calculating the budget for next month, and so on.
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Spend Your Money Responsibly
If household expenses are too high, you will need to take several austerity measures to make it fit the projected budget. Whenever you have the chance to rent or borrow something, do it, don’t buy things that you’ll only use for special occasions. Also tend to pay your service bills in a bundle, since this is usually the most affordable way. There are plenty of bundle deals you can sign, “cable+telephone+internet” is a great example. In some countries like Australia, parents are able to pay their children’s school expenses (tuition fees+student home logging+books…) in a bundle with the school easy pay tool.
Mortgage is another area where you can save up a lot of money. Save up few months before you sign an actual contract and pay bigger down payment than you intended since this will bring you a better repayment terms and smaller interest. While mortgage is in most cases a very payable loan (if you are taking it out of bare necessity), there are plenty of other loans that are totally unnecessary. Whenever you plan to sing a loan deal for buying a new car, flat screen TV or for spending your vacation on some exotic island half way around the world, think about least expensive alternatives and money that you’ll spend on interest.
Make Smart Investments
When making an investment always do an elaborate research about the option you want to buy. When it comes to stocks, you need to collect as much information as possible about the company, before deciding to buy its shares. Stock market experts advise people to have diversified investment portfolios and to use their money for buying many different options such as: stocks, bonds, binary options, forex, real estate, etc.
Another great investment opportunity is your 401(k) plan. Many employers offer retirement plan matches that cover up to 6% of employee’s income, which is like offering free money and you should definitely accept it. Although there are a lot of people who start investing in their retirement plan in their fifties, there are also many 401(k) millionaires out there, who are spending their retirement in exotic island villas.
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Build Your Savings
How to save money is an art. All of the household income that’s left after calculating budget and laying monthly inventions should end up in family’s savings accounts. If you manage to save $1,000 per month during 15 years, you will have $150,000 plus interest that in good banks, varies from 1 to 1,15% APY. If you start saving at a young age, you will be able to use that saved money for some of the big life challenges. Savings can also be used as emergency funds, with certain banks that allow collections before the ending date.
When you take a better look on how to save money, it seems that personal finances are not that difficult after all, if you apply proven strategies and get tactical and frugal when it comes to spending.