The security of having money in a savings account can be incredibly freeing. Building savings isn’t easy, especially if you see yourself as someone who never has any money. Deciding that you are a person who can save money is a crucial first step.
Track Expenses and Build Your Budget
A budget will not work if it’s imposed from outside. The key to a budget that works is to build it off what you are spending right now. To start, pull data from your bank statements and credit card statements to see where money is going right now. From this data, you can start to scale back your spending.
Once you have this information, you can set parameters for what you’re willing to spend. For example, a better-paying job may look like a great deal, but if it requires a considerable wardrobe increase or a better car to make the commute, you will need to budget to cover those expenses. So, for example, it may turn out that a lower-paying job close to your home could give you more to live on.
Determine Worth for You
As you pull this data, you can build an awareness of your money is going. A simple way to build such awareness is to get a printout of your credit card or bank statement and grab a couple of highlighters.
What were purchases worth it? Highlight this in your favorite color. Draw a smiley face on it. Now find the purchases that were not worth it. Use your least favorite color, use a frowny face or write “never again!” beside it. Determining worth is very personal; what works for you may be a completely unnecessary purchase for someone else. If you have people in your life who want you to put your money into items or activities that don’t work for you, it’s time for an honest conversation about your choice to focus on your expectations.
Save for Emergencies
Don’t panic if you have no idea what you need to live for six months. Start by saving up enough to cover groceries next week or gas for next month. Once you have that put away, look for ways to cut back on those expenses and stash that in your savings account. Work your way up the chain to save enough to cover higher expenses, such as
Start again with gas and groceries when you have that in the bank.
When you were a child, you may have seen your parents put their pocket change into a jar. You may have been encouraged to put it in your piggy bank. However, if you seldom shop with cash, you can still save those pennies directly into your emergency savings. According to the experts at SoFi, “Pennies will add up if you round up your purchases for automatic savings.”
Many budgeting apps are available, but sometimes putting pen to paper is the best way to build awareness of what you have and need. Make money awareness part of your weekly maintenance to create a budget that works for you. For example, banks like SoFI Invest (SoFi Bank) will help maintain your savings.
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