It seems that there is always something to save money for, whether it be travelling, your first house, or maybe your wedding. Because we always seem to be actively saving to travel, this blog post will be based around the idea of saving money to travel, but these tips can of course apply to other areas of your life as well. Let’s dive in!
1. Determine How Much You Need to Save & By When
You’ve looked on the world map and narrowed down exactly where you want to go for your next holiday. Now, it’s time to save the money to get you there!
The bulk of initial holiday spending usually lands on flights and accommodation, but you mustn’t forget about the money you’ll need for things like food & drinks, sightseeing, and transportation when you’re there, whether that be a hire car or public transportation. Also remember to tack on extra spending money for those “just in case” moments and emergencies!
If you already have some money saved, feel free to deduct that from your total amount needed or if you’d like, you can start from scratch. Once you have the total amount needed, write it down somewhere for you to see and to remind yourself of your goal.
Not only do you need to know how much you need to save, but also by when. Whether your desired holiday is coming up in 3 months or 3 years is a very important factor. When you’ve determined by which month and year you need to reach your savings goal, write it down next to your total amount needed.
2. Send Automatic Deposits to Your Savings Account
I have had a regular set amount of money sent automatically to a savings account each month for as long as I can remember, and it is by far one of the best ways to ensure money is being put away. The key here is to ensure the deposits are automatic. The way I’ve always seen it is, if, once you receive your monthly income, a chunk of it automatically goes to your savings account, it’s money that you don’t see and therefore money you won’t use.
Now, how much money should be going into your savings account? You’ll have to take into account your monthly income, how much you need to save, and how long you have to save. You can then determine how much you can afford to set aside each month.
Maybe you have no grasp of how much money you spend and therefore have no idea how much you can afford to save. In this case, you’ll first want to add up all of your fixed expenses (like rent and bills) and deduct it from your monthly income. This will leave you with the remaining amount you have to spend on everything else. Go through your online banking to see approximately how much you’ve been spending on “everything else” and you should be able to come up with a rough number of how much you can afford to save.
You can play it safe by initially saving a more conservative amount and seeing how your month goes. If you find you’re doing alright, increase the amount the following month!
You’ll want to set up a standing order (or your country’s equivalent) of your set amount to go into your savings account each month. For those not familiar with standing orders, in the UK, they are instructions that you give to your bank to deposit a set amount into another account at regular intervals. As an example, you could set up a standing order to deposit £250 into your savings account on the 1st of every month until you cancel it.
3. Track Your Expenses
I cannot stress how important this step is, especially if you are the type that always wonders where your money goes! You must, must, must track your expenses and fully understand what you are spending your hard-earned money on!
It’s so easy to spend £5 here and £10 there because the thought is, “It’s only £5” and, “It’s only £10”, until you’ve spent 20x of those £5 and £10 and suddenly, those are very big amounts. The daily morning coffee run, the eating out and takeaways, and the random impulse buys that don’t seem to cost much do all add up.
Create a simple spreadsheet and update it every single time you buy anything. Then, at the end of the month, take out the spreadsheet, go through each item, and note down if it really was a necessity or not. For the sake of simplicity, only track down your variable expenses. You can’t change the fact that you need to pay for your fixed expenses, so tracking your variable expenses is key here.
4. Buy Only What You Need
It’s quite possible that after tracking your expenses for a month, you’ve realised that you do spend at least some of your money on unnecessary things. Now is the time when you need to start cutting down on the unnecessary spending.
It may seem like we need a lot to live our lives, but we really don’t. Once our basic needs are met, we don’t need much after that. What we may think we need are actually more often than not just wants. You have clothes bursting out of your wardrobe – you don’t also need that new dress. You have enough mugs in your kitchen cupboard – you don’t need this cute one too. You have enough stuff on your mantle – you don’t need that pointless knick knack that’s just going to collect more dust.
If you’re having trouble, an idea is to start paying for everything in cash. Set up jars or envelopes, each labelled with a spending category (like clothes shopping or eating out), and put in the maximum amount of cash that you’re going to allow yourself to spend for each category. If the cash runs out, tough luck! Each month, make it your aim to reduce the amount of cash in each category or eliminate them completely! Paying with cash provides more of a feeling of accountability, not to mention helps you avoid impulsive online shopping!
5. Practice Willpower
For those that are used to mindlessly spending money on anything, you must resist the temptation. You have to practice willpower. I can only provide you with tips on saving money – it’s up to you to get the job done.
Remember what you want to achieve! You came up with your dream destination and you wrote out how much money you need to save and by when. Revisit it and use it as your power to keep going and keep saving!
Do you have any additional tips for saving money? Anything from my list you liked best? Let me know in the comments!