Sunday, May 15, 2016

3 Steps : How to Start Saving Money

      In my yesterday's entry, I wrote about the days I started thinking about saving money seriously. Today, I decided to share how to start saving money with you. I did these three steps listed below when I was 20s, and I was able to train myself to manage my money well. Because of that, I could save up pretty good amount of money until my late 20s.

Step 1: Know How You Spend Money
       If you want to save money seriously, you should know how you usually spend money. First, you should know yourself. Buy a note book, keep detailed accounts on it. It's very important to know how much you spend for food, daily essentials, entertainment, clothing, education, medicine, car and etc.

Step 2: Make Budgets 
      After you keep detailed accounts, you will be able to estimate how much you can save money each month. First, make budgets for each category. If you get your hair done for $100 every two months, make a budget $50 for it every month. If you own a car, you should make a budget for it every month. It's not only gas fee and insurance fee. You need to think about registration renewal fee, maintenance fee such as car checkup, replacement of car tires, buttery, break belts etc. In addition, you need to keep in mind that your car doesn't last forever. Someday, it breaks down, so you need to make a budget for buying a new car. If you want to buy a $20,000 car 5 years later, you need to keep $350 for your future car every month. Let's say, you estimate $1,200 for registration renewal fee and maintenance fee a year, you should keep $100 a month for those. Your gas fee might be about $100 a month. Your car insurance cost $960 a year which is $80 each month. In total, you should make a budget $630 a month for your car expense. If you buy expensive appliance such as refrigerator, washer and dryer, you should think expected lifetime. If your refrigerator cost $1,000 and you think it lasts 10 years, you should make a budget $9 a month for it. By thinking your budget this way, you don't have to be worried too much about when you suddenly need big money such as buying a new car. You might realize that your expense is higher than you thought. Even if you think you saved up $500 this month, it's not really saving unless you consider those future expense.

Step 3: Decide What You Can Save and What You Cannot Save
      Once you realize that your expense is huge by making budgets for each category, you might think you cannot save any money. Actually, you can still save money. Go back to your note book of step 1, and find something you should have saved. First, you need to review your fixed cost such as apartment rental fee, phone plan, car insurance and etc. If you can move into cheaper apartment, you should consider it, but don't move a lot because moving fee is expensive and when you move into a new place, you are likely to think you need to buy something for your new place. It ends up costing more money, so moving is a little tricky. Think and do the math carefully if it is really worth the time and money for you. However, it's good idea to review your phone plan. If you can find cheaper plan, changing the plan or phone company might be a good idea. After reviewing your fixed costs, you should review your food expense. How often do you eat out? Why do you eat out? How much do you spend for your food a month? Eating out regularly is definitely the thing you should change. As I mentioned in my previous entry, if you eat out, it's easy to spend $10 to $20 each meal. If you buy 60 meals a month, it might cost $600 to $1200 a month. If you cook, it costs $120 to $180 a month. If you are too busy to cook every day, I don't think you should cook every meal, but you still shouldn't eat out. You can still find wise ways to cook. I'll write about it some other time. However, if someone asks you to eat out together once in a while, you shouldn't reject that offer. Eating with someone is not only for filling your empty stomach. It's a really precious time, so enjoy it!  If you love fashion, and you think you tend to buy too many articles of cloth, you should manage the expense on your budget. I think clothing and beauty expenses are essential for everyone. If you don't go to hair salon and wear a well-worn shirt, it lowers your value. In order to enhance your self esteem, don't save too much about those. Make a budget for those and manage your expense. In sum, first review your fixed costs, then make a great effort for limiting the frequency of eating out.

     I'll write about cost of eating out vs eating at home next time.

These are my entries you might like.

1. Why Couldn't You Save Money?

2. Start Saving Money In Your Early 20s

3. 3 Steps : How to Start Saving Money

4. Cost of Eating Out vs Eating at Home

5. 9 Ways to Save Money on Food - Grocery Shopping

6. 8 Tips to Save Money on Foods - Cooking

     My entries related to money can be seen here.

     My entries related to cooking can be seen here.

     This is my entries related to my favorite recipes.

     My entries related to Japan can be seen here.

No comments:

Post a Comment