Building Habits to Save Money and Grow Your Savings
As a CERTIFIED FINANCIAL PLANNER™ and a financial coach, I understand that saving money is always on the top of people's minds. While trying to save money can feel like a chore of its own. It can be totally overwhelming for some people to think about reviewing their spending habits or altering them in any kind of way. Let's attempt to change the way we perceive spending and saving money. Often when people "fail" at making and sticking to a budget, it's because they focus on the wrong part! Instead of thinking of all of the things you're going to need to do differently and how you're going to have to alter your savings, you should focus on what becoming a better saver will do for you in the long run.
So the million-dollar question… what will saving do for you?
Spending Less and Saving More
The reality of the situation is that times are always uncertain. Economic growth isn't exponential; in other words, the good times don't last forever. It doesn't matter how much money you make if you're in debt or totally free - everyone should be aim to save more and spend less. Instead of asking why you should save, rather ask what you're saving for. Having trouble? Here are a few jump-off points to get you excited about saving money and building a savings account.
First and foremost, save to create an emergency fund. I recently wrote about emergency funds. To sum it up, an emergency fund is something you can have that will help you stay away from those pesky credit cards. Instead of spending money you don't have when an emergency or unexpected expense pops up. You will be able to rely on a well-funded emergency fund that you've built over time. An emergency fund should generally be able to cover your necessary expenses for eight to twelve months.
Next, you could start a savings account. No, this isn't the same as an emergency fund. Savings accounts can be used for anything, while emergency funds are meant strictly for emergencies - things like wrecks, doctor visits, lost jobs, or economic downturn. Your savings account could be used for something like a new car, a large (but planned) purchase, a down payment for a house, sending your children to college, or going on vacation! If you happen to have more than one savings goal you should read my blog post on savings buckets!
Now, I can see some of you possibly wondering why I spent so much time talking about why you should save in a post about how to save. The answer is simple, it's easier to set back money regularly if you have an idea in the back of your head why you're doing it. In other words, it's easier to fail if you don't have a long-term plan or goals for how your money is going to be used.
Okay, now for the good stuff. We're going to get into some simple habits you can create that will help you save money. This is simple stuff, and, likely, you've already considered doing some of it; however, turning some of these tips and tricks into routines will help you save a significant amount of money that you'll be able to put towards emergency funds and saving accounts! So without further ado…
Follow up on electricity bills!
Following up on your electricity bills could save you a large chunk of money each pay period. While it's simple enough to trust the electricity company, you can also keep track of how much energy you've used throughout the month and calculate what your bill should be. If you're interested in doing this, I've actually written a reasonably thorough blog post about analyzing your electricity bill that should help you out! Keeping track and following up on your electricity bill can be broken down into three main steps:
- Keep Track of Your Energy Consumption
- Make Sure Your Bill Aligns with Your Estimation
- Contact Your Energy Provider About Disputes
Once you've done that, there are still a few ways that you can keep costs down. You can contact your energy company or a third party to do an energy audit. This is usually a checklist-style rundown to make sure all of your major energy-draining areas are in check. Secondly, you can make minor adjustments to how you consume energy - like adjusting the AC when you leave the house in the summer, so it's not constantly running. You can also contact your provider about any possible discounts that they may have available. While often the answer is "we don't have any," it's worth asking from time to time just in case. After all, it only takes one "yes" to begin saving some money each month.
Keep an Eye on Your Water Bill
Keeping track of your water bill is very similar to keeping up with your electric bill. You can contact your water provider from time to time and ask if they're offering any discounts. While the answer is usually "no," it only takes one "yes." You can also keep track of your water usage by writing down what your water meter says at the beginning and end of each pay period. This should make sure that you're not being over-charged for estimations done by the water company. Keeping track of your bill will also ensure that the water company isn't making any mistakes and that your house is free of water leaks (you don't want to be charged for water that you aren't even running).
If you ever notice that your lawn or property is overly wet, you may want to contact your water provider for an inspection. While it could be annoying, an inspection could save you hundreds of dollars if you're being charged by the gallon. If you do find a major water leak on your property, have it fixed and then notify your water company. sometimes they will credit your bill.
Shop Around to Lower Bills
For other bills, it's always a good idea to shop around as long as you aren't locked into a provider by a government agreement. If you're shopping around and find out that your bill is higher than it needs to be, providers will often offer to buy you out of an existing contract. For example, if you're shopping around for your phone bill and find out phone company X is cheaper than phone company Y, phone company X will often pay any early cancellations that may be attached to your existing contract. To ensure that you're being charged competitive rates, you should shop around once a year to make sure that you're still getting a good deal. After all, there's nothing worse than paying your bills for years only to realize you've been overcharged.
Other examples of bills you should shop for are insurance (home, auto, health), cable bills, and gym memberships. Some of these are "little" bills but make a significant difference in the grand scheme of things. For example, there's a big difference over twelve months if you're paying $80 or $30 each month for the gym. Some choose not to shop around for some of these bills because of the hassle associated with switching providers. However, you should also consider the "hassle" of working hours on end to keep your existing plan. In other words, if you're working 20 hours each month to make a larger payment on an insurance bill, is it really less of a hassle than switching providers? Probably not.
Check Your Automatic Charges and Subscriptions
Another thing you can regularly do to save money is to check your automatic subscriptions! If you're a google play or an Apple user and you subscribe to apps through your phone, you should be able to find your auto-subscriptions reasonably easily.
- On iPhone:
Navigate to your account in the app store. From here, you can click on "subscriptions," which should show you a list of all of your automatic subscriptions and free trials associated with your iCloud account.
- On Android:
Open the google play app, and navigate to your profile. Here you'll find payments and subscriptions, which should take you to a list of all of your current and past subscriptions.
It's worth noting that this will only show you the auto-subscriptions associated with your google play or iCloud account. This won't show you all of your subscription-based services. There are, however, a few ways to find out your subscriptions. For starters, you could dig through the payments on your bank account or credit cards and see what you're being charged for regularly. While this works, it can sort of be a pain. Some services will automatically do this for you by linking your bank account to an app or website. Unfortunately, some of these services charge a monthly fee (ironic); however, some offer a free "lite" version of their app which will still show you your subscriptions.
Stay Up to Date on Your Maintenance
Outside of bills, subscriptions, and accounts, there are also some physical steps you can regularly take to save money.
- Change Your Air Filters
Whether you're in your car or your house, a dirty and clogged-up air filter uses extra energy. This translates to a more expensive electricity bill for homes or more wear and tear on your car battery over time. To avoid this, simply change the air filters in your house every thirty to ninety days. In your car, you should change your air filter every few oil changes. Speaking of oil changes…
- Get Your Oil Changed
Keeping the oil changed in your car will help it run smoother; It will also extend the life of your vehicle. It can be annoying to change your oil or get it changed, but it's worth it for your car and your wallet in the long run.
- Fix Leaky Faucets
If you have a faucet that's leaky or dripping, don't just ignore it. Don't just say, "oh, it's barely dripping, I don't need to worry about it - go ahead and get it changed or fixed. It'll save you a small fortune - especially if you're being charged by the gallon.
- Fix Air Drafts
Air drafts in your house aren't only uncomfortable; they're very inefficient. If you live in a place like I do (Texas), it gets HOT. Imagine your AC running non-stop, trying to keep up with the summer heat while cold, expensive air is leaking out of a door or window frame. If you live in a cold place, this can be a real issue in the winter months. Keeping your house draft-free is a relatively simple and easy way to save a ton of money.
Plan Your Present Shopping Ahead of time and stay within a budget
Okay - I know this isn't the "fun" thing to do, but Christmas and birthdays come at the same time every year. There's no excuse for waiting until the last minute and getting slammed with Christmas present bills. Instead, buy presents ahead of time when you have extra money here and there and stick to a pre-planned present budget.
Track Your Spending and Revisit it at the End of the Month
Saving money means spending less. To do this (scientifically), you should track how much you spend each month. See how much you spend and on what to see where you're wasting money. Some apps will help you create a pie-chart budget based on saving money and your income, and the best apps always seem to have a free version.
Try Doing Some Repairs or Maintenance Yourself
If there's easy home or car maintenance to be done, don't be afraid to get down and dirty and tackle it yourself. Paying for repair people can cost an arm and a leg, and often if you know what the issue is, it won't be too difficult to fix. If you're willing or mechanically inclined, you'll save hoards of money by doing this. However, if you're uncomfortable doing home or auto repair on your own, that's understandable. You don't want to bite off more than you can chew and risk damaging your home or vehicle or hurting yourself.
Downgrade Premium Services if You're not regularly Using Them
When I go through people's expenses with them, I'm often shocked by how many people pay for premium services that they don't ever use. Perhaps the premium service was needed at some point in time but isn't anymore, or perhaps you paid for premium as a free trial and promptly forgot about it. Either way, make sure you aren't overpaying for the more expensive premium services if you aren't using them. While this isn't usually a ton of money, it all adds up.
A CERTIFIED FINANCIAL PLANNER™ Can Help you Develop Health Financial Habits to Grow Your Financial Plan
Saving money and putting money back can be difficult. If you aren't sure why you're saving or what you're saving for, it's even more difficult. Instead of saving money for no reason, why not create a great financial plan and get started creating a more financially free future for yourself. As a CERTIFIED FINANCIAL PLANNER™, I've worked with clients to develop strategies and establish emergency funds and savings. If you or a family member need some guidance in saving money, please call or email to schedule an appointment with me.
Until next time... this is Melissa Making Cents!
Melissa Anne Cox, CERTIFIED FINANCIAL PLANNER™, is also a College Planning and Student Loan Advisor and Financial Coach in Dallas, Texas.