We’ve all had it happen to us. You’re cruising down I-95 with the windows down and the music blasting, and then, in the blink of an eye, you’re on the side of the highway with a tow truck on its way. I bet you really start to regret spending that $20 on Chipotle last weekend when the auto shop reports the total cost of damage repairs. Yikes! If only you had been better prepared for this impossibly possible moment.
While we can’t prevent the sometimes inevitable, there is a way to ensure that we are a bit more financially prepared when the time comes. Here is a simple guide on how to save money and how to spend it wisely.
Step 1: Find an outlet for saving.
You will need a source to store your money. Try these:
A savings account
Opening up a savings account with your bank will save you tons of headaches in the future. It is convenient to deposit and withdraw money at any ATM or check and manipulate your balance from your laptop or smartphone. This is a great system to use for “life savings”, or money you will use for the future—i.e., rent, a new car or student loans. And if and when the unfortunate does unfold, it is worth it to know you have a safety net of money to cover the damage fees.
A storage jar/bag/box
This is a similar idea to the piggy bank you may have had as a kid, where you store physical bills and coins in a tangible item and can pull out of it whenever you choose—though it should probably stay in there awhile. One of these storage items can be used for more “fun” things that you’ve been saving for but don’t want to pay interest on. Maybe you’ve promised yourself you would travel to France or Italy when you had the money, or maybe you want to soon splurge on a whole new wardrobe. Before you know it, you’ll be paying for it with this jar.
Step 2: Deposit money in said outlet.
Now that you have your form of saving established, it is time to put it to use. Here are some tips on how you can start building on your wealth:
1. Get rid of all your coins and dollar bills
It is 2015. Who wants to walk around with a bunch of coins and singles that weight down the wallet? Here’s a little trick: every time you spend cash on an item and the cashier hands you the change, put all of the dollar bills and coins aside to throw in that storage jar/box. Sure, it may feel like you’re wasting precious cash at the moment, but those little savings will all be worth it in the end.
2. Limit your purchases
Obviously that midnight call for Chinese sounds great on a Saturday night, but if you want to start saving money for real, you may have to cut down on the amount of food you order out. Instead of five times a week, maybe just stick to the weekends or when your meal plan runs out.
Similarly, decide if it is worth it to go clothes shopping every weekend if your closet is already exploding and you already have an arm inside your roommate’s closet, too. Before you spend money on anything, think about how much you actually need that item. If you can live without it, move on. Your wallet will thank you.
3. Reward yourself for these limitations
So by now you’re feeling pretty heartbroken that you left behind that $50 sequined sweater at the store. However, there is a light at the end of the tunnel because this is a perfect opportunity to add to your savings. Once you realize that $50 would be better off spent on something else, put that amount into your account. If you think the price of the item you bought is a little high to put all of it away, at least deposit half of it. You’ll feel great knowing you put that money toward important experiences in the future, rather than blow it on a video game you will only end up playing once.
4. Cut your paycheck in pieces
If you currently have a job, you know you work hard for your money, and there is no better feeling than receiving that paycheck. Okay, maybe spending a major portion of your paycheck is an even better feeling, but your future bank account will not agree. A great idea is to throw about 10 percent of your earnings—if not more—into your savings. Granted, that may only be less than $10, but that could mean about $200 is saved in only a year.
Step 3: Calculate and appreciate.
When you combine all of these ways to save money, you will be surprised at how much money you will have saved by the end of the year. It is great to reward yourself for all of your hard work and dedication, especially since it is not easy to put money away while also avoiding buying pizza with it.
Hopefully these tips have made you a better consumer and money saver. (And hey, if you only end up saving a penny a day, you will be $3.65 richer by the end of the year.)