How to save. More.

By Thursday, October 28, 2010 0 , Permalink

Since the crisis started, I’ve been seeing a lot of articles on how to cut down on spending.  you-have-no-money
I’ve always been the saving kind of person, doing budgeting, checking where my money goes, saving at first 10% of my income, then reaching up to 30% monthly.

Recently, I’ve been looking a lot at my finances, income and savings.  I’ve started to look forward at next month’s paycheck and distributing the money in advance: “this much on rent, this much on food, this much on going out…”
My goal is to save – well, at least for the next few months, as much as possible. If until now, I’ve established a comfortable threshold, this will be cruel, bitter and gruesome.

Savings = Income – Fixed expenses

If you subtract rent + utilities + food + transportation + debt (if any)  from  your monthly income, you end up with what you can save.

From this amount of money, you have a choice. No, don’t tell me that buying that pair of shoes or that new telephone is a must, cause it isn’t. You make a conscious choice to spend your savings here.

Now, out of this sum, there are some spendings you want to make to maintain a healthy lifestyle. I cut down once on everything, while I lived in the US and saved every penny for when I would return home from my Work & Travel experience. Believe me, it’s not pleasant to pass by Starbucks every day and know that with the money for a Frapuccino you could buy a Subway sandwich and not need any further lunch.

Step no. 1.  “Do I really – really need this?”

Having seen “Confessions of a Shopaholic”, I know there will always be a reason a girl needs another green scarf to make her eyes stand out at that important interview. But the angel on the right shoulder should  step in.

So, Working Girl here gives tips on how to save and what categories of spendings are ok to keep and what not. For example subscriptions of magazines you don’t read – that should go. Groceries, on the other hand, are a keeper. In fact, smart spending on groceries might save you money because you can cook more and spend less going out. I couldn’t agree more.

Be ruthless.

2. Transfer to your savings account as soon as the paycheck arrives.

If you keep the money on your debit card, or even worse, in cash, you’ll always be tempted to spend it.
When I was a student and had much less to spend, I used to put my cash in separate envelopes “Rent”, “Food” or “XYZ debt”. Then I would seal the envelope and not touch that money.

If you have a savings account, think about a safe amount that you can transfer at the beginning of the month – you decide how much.

3. Look back. Decide.

After each month, look back at what you spent.Financials
I used to keep track of my savings using this file and chart.

You might be surprised how many “useless” things you get. Or you might congratulate yourself.

4. Cut on cash.

Don’t carry cash with you – you’ll be amazed at how quickly it dissipates.
Set a limit on how much you want to spend and when – for example, if you go grocery shopping, and you decide to spend 100 RON, it’s ok to pay by card (actually, it’s advisable, since you save the commission on cash extraction). But be really disciplined.
If you feel you might overspend, just take the 100 RON with you and leave the card at home.

5. Other tips.

Don’t buy magazines. I’m a huuuuge fan of glossy magazines but discovered I can live just fine without them (this month I didn’t buy any, yey :D). But magazines trick you into buying more stuff.
(Yes, even the Economist sells the new MBA or the new Leadership course. )

You can read them online.

Go to movies during weeknights. Or better, really choose well your movies. Take friends and benefit from group discounts where possible.

Cook at home instead of eating lunch in the office or ordering food. I started to specialize in big ciabatta sandwiches and have a bag of corn flakes in my desk for the morning breakfast.

Spend leisure time with friends (boardgames rule :) ), reading, or outside, instead of shopping.

Finally, remember that every penny set aside is a promise of a better future.

If you’re really serious about saving, download the monthly Financials tracker and start planning!

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