Inventive ways to save money and make budgeting enjoyable

Sometimes the hardest thing about saving money is just getting started. This step-by-step guide can help you develop a simple and realistic strategy so that you can save for all your short-and long-term goals.

Record your expenses

The first step to start saving money is figuring out how much you spend. Keep track of all your expenses—that means every coffee, household item and cash tip as well as regular monthly bills. Record your expenses however is easiest for you—a pencil and paper, a simple spreadsheet or a free online spending tracker or app. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Use your credit card and bank statements to make sure you’ve included everything.

Include saving in your budget

Now that you know what you spend in a month, you can begin to create a budget. Your budget should show what your expenses are relative to your income so that you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance. Include a savings category in your budget and aim to save an amount that initially feels comfortable to you. Plan on eventually increasing your savings by up to 15 to 20 per cent of your income.

Find ways to cut spending

If you can’t save as much as you’d like, it might be time to cut back on expenses. Identify nonessentials, such as entertainment and dining out, that you can spend less on. Look for ways to save on your fixed monthly expenses, such as your car insurance or cell phone plan, as well. Other ideas for trimming everyday expenses include:

Search for free activities by using resources, such as community event listings, to find free or low-cost entertainment.

Review recurring charges by cancelling subscriptions and memberships you don’t use—especially if they renew automatically.

Examine the cost of eating out vs. cooking at home by planning to eat most of your meals at home, and research local restaurant deals for nights that you want to treat yourself.

Wait before you buy. When tempted by a nonessential purchase, wait a few days. You may realize the item was something you wanted rather than needed—and you can develop a plan to save for it.

Set savings goals

One of the best ways to save money is to set a goal. Start by thinking about what you might want to save for—both in the short term (one to three years) and the long term (four or more years). Then estimate how much money you’ll need and how long it might take you to save it.

Common short-term goals: Emergency fund (three to nine months of living expenses), vacation or down payment for a car

Common long-term goals: Down payment on a home or a remodelling project, your child’s education or retirement

Determine your financial priorities

After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings. For example, if you know you’re going to need to replace your car in the near future, you could start putting away money for one now. But be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs. Learning how to prioritize your savings goals can give you a clear idea of how to allocate your savings.

Watch your savings grow

Review your budget and check your progress every month. That will help you not only stick to your personal savings plan but also identify and fix problems quickly. Understanding how to save money may even inspire you to find more ways to save and hit your goals faster.

Source: Bank of America