After the expensive holiday season, it’s common to want to start budgeting and getting a handle on your finances. Most people are a bit intimidated about setting up a budget, but as with any other habit, you don’t need to make a huge overhaul to your lifestyle to see positive results. All you have to do is make a few small changes, and soon you’ll see your savings account grow.
Now, this isn’t your standard budgeting blog. Who says that you can’t have fun when creating a sustainable financial plan for your needs? So if your New Year’s Resolution is to save more in 2022, here are some creative methods that will make your wallet sing.
1. Write Down All of Your Purchases Every Month
Chances are, you may not even know what you are spending per month and where the money is going. To get the biggest bang out of your budget, you’ll need to audit your finances to really see what’s going on. If you have no clue where to start, simply write down every purchase you make, whether it is made by you or is automatically taken out of your account.
Once you have a good visual of your spending habits – we suggest at least a month’s worth of data – take a look at everything and see if there are any expenses you can cut back on or ones you can eliminate. Perhaps you are paying for subscription services you rarely use, maybe you pay a premium on insurance that you don’t necessarily need, or you could be spending way too much money eating out when you can cook at home. Taking the time to truly examine and audit your finances and every single purchase you make can result in significant savings.
2. Try the Penny Challenge
The Penny Challenge is proof that when you stay consistent with your savings, even the smallest amounts can add up to something substantial. The idea behind this challenge is easy, all you have to do is start with saving one penny on January 1. On January 2, you’ll save 2 pennies, on January 3 you’ll save 3 pennies, and so on for all 365 days. Every day you’ll save the same amount of pennies as the day before, and then add one more.
After the first week, you’ll save 28 cents, by the end of June you’ll have saved $179.55, and at the end of the year, you will have saved $667.95.
3. Consider the 50/30/20 Budget
Not sure where to start when it comes to establishing a budget? Using something simple like the 50/30/20 budget can be a great way to get you started with healthy saving habits.
This budget breaks down your spending into 3 categories; your essentials, your savings, and nonessential items. You will start off paying yourself first and putting 50% of your income towards your essential bills like your rent, car payments, student loans, groceries, paying down debt, and healthcare costs. You’ll then use 30% of your income for personal but nonessential items, such as going to the gym, saving up for a vacation, going out to dinner, and buying clothes. The remaining 20% will go straight into your savings, such as your emergency fund, 401k/ Roth IRAs, and your Health Savings Account.
What’s great about the 50/30/20 system is that it can work for you no matter your monthly income, or how many times a month you get paid. Just take the time to sit down and do the math at the beginning of each month so you know how much you have to put aside into each category.
4. Match Your Nonessential Spending With Your Saving
If you don’t want a “formal” savings plan, this option could be for you. The premise is pretty easy, all you have to do is match your savings with how much you spend on nonessential items. Every time you spend money on things you don’t necessarily need, such as a latte, a new book, a round of beers, or that new sweater, you put the same amount of money into your savings account. That means if your nonessential total for the day was $44, $44 goes directly into a savings account that you can’t touch.
Not only does this method help you find savings opportunities in your daily life, you most likely will find yourself cutting down on those unnecessary purchases!
5. Figure Out How to Cut Down on Your Utility Bills
Your utility bills are not set in stone. Just because you pay similar amounts each month, doesn’t mean these prices can’t change. There are a lot of easy ways in which you can lower your bills, including:
- Ditching regular light bulbs for a more energy-saving LED option,
- Unplugging all appliances when they are not in use,
- Taking lukewarm showers instead of steaming hot ones,
- Invest in a low-flow showerhead that can cut down on the amount of water you use every day,
- Change your air filters every month,
- Use a programmable thermostat.
Try making the above changes, and see how much your utility bills drop in just one month!
6. Change Up the Days You Shop
Do you tend to grocery shop on the same day every week? If so, chances are you are missing out on some hidden savings. Most grocery stores tend to launch new sales in the middle of the week, and if you go shopping on the day they are released, you’ll have better access to new promotions and limited-edition discounts. Next time you go shopping, ask your store what day their sales come out, and switch up your shopping habits accordingly.
7. Take a Deeper Look at Your Investments
Your investments are meant to work for you, not against you. There are plenty of investment options that can help you bring in a higher return month after month, year after year. And the switch is simple, sometimes all it takes is to move your money from a regular bank account into a high-yield savings account. Our team at Second Opinion Partners is here to help you optimize your investments depending on your specific needs and goals. Schedule some time with us at the beginning of the year to go over your new financial goals and we’ll see what new and improved investment options are available.
8. Try the $5 Trick
Saving money is all about little tips and tricks that you can incorporate into your daily life. There’s nothing easier than this; all you need to do is every time you come across a $5 bill, put it away in a piggy bank. So no matter if you get money out of an ATM, receive change from a restaurant, or get money as a gift, if you find a $5 bill, save it. Think of it as a game, as at the end of the year you’ll be surprised by how much you saved!
9. Only Spend Cash
After you have created your monthly budget, make it a habit to only spend with cash. Take out all the money you have allocated for spending for the month and create an envelope system that categorizes your purchases. So you can have one envelope for groceries, one for your rent and utilities, and one for other miscellaneous items such as buying coffee, shopping sprees, and beauty treatments.
Put your allocated amount into each envelope on the first of the month, and once you have spent everything in the envelope, you cannot spend more in that category until the following month. Paying in cash will help you gain insight into your spending habits while saving you money from unnecessary impulse purchases.
10. Automate Your Savings
It can be all too tempting to spend your entire paycheck as soon as it hits your bank account and not take money out for savings. So, to prevent this temptation look into automating your savings. Most banks and payrolls offer the option to put a certain portion of your wages into a separate bank account for you every pay period. Go the extra step and set it up with your bank where you can deposit money but not withdraw funds, meaning your savings will be protected in a safe space. When you do this, you’ll wake up on payday to the cash both hitting your main account and your savings, and chances are, you won’t even miss the small portion you have stashed away.
At Second Opinion Partners, we understand that finances are deeply personal. We take pride in providing financial education for goal-oriented individuals who want help identifying, defining, and planning the course of action needed to achieve their One Best Life. No matter your financial goals, our team is here to help you make informed decisions with clarity and confidence.
If you need help creating a budget for 2022, look no further. Contact us today to schedule an appointment with our team.