Today, I wanted to talk about 3 saving techniques that anyone can do every month to grow their savings and feel more secure financially. Whether you're trying to save to buy a house, to plan a trip abroad, or simply because we never know what tomorrow is gonna throw at us, I hope you can find ways to help you do so here.
Before we even mention the different techniques, the first thing you need to do is list all your monthly expenses. From everything you absolutely have to pay (rent, groceries, utilities, transportation) to everything you usually spend (restaurants, cinema, shopping,...). Now that this is done, let's see how we can cover all of this and more with your pay check.
The $0 technique
The principle of the zero-based budget technique is fairly simple: you take all the expenses you just listed, you subtract your monthly income, and you want this number to be 0. Every single dollar you earn must find its place in your budget.
Parts of it will go to mandatory expenses of course. Once this is taken care of, you still need to find a purpose for whatever's left. You want to keep $50 for fun activities? Sure, do that! You want to invest $300 in crypto or stocks? If you can, do it! If you're left if something after this full breakdown, just set everything else aside as savings and/or debt payment.
When you do this for the first time, you're most likely not going to get 0 right away. If you get a negative number (meaning you spend more than you earn), you need to find ways to cut down on some expenses (buying generic instead of brands, dining out less, ordering in less, doing less shopping, carpooling to go to work...). On the contrary, if you get a positive number, it means you don't spend all of the money you make, and that means you can set aside more than you usually do! Yay you!
The 50/30/20 technique
This is related to what we just talked about, but in a more structured way. However, this time, we'll start by grabbing the pay check, and splitting its amount into these categories:
- 50% of it goes to "needs", your mandatory expenses,
- 30% of it goes to "wants", your fun time that you don't need but that you want,
- 20% of it goes to your savings.
Keep in mind that, while rent and groceries are obvious needs, Spotify and Netflix are just wants ??. With this method, the last 20% also cover your potential debt payments.
Of course, like every saving method out there, it's easier said than done. To help you reach this perfect division, multiply your income by 0.5, 0.3 and 0.2 to see how much you should allocate to each category, and set this as a budget goal. Try to stick to it, targeting no more than these 30% of wants spending each month.
While the 50/30/20 is the most famous split (thank US Senator Elizabeth Warren for that), you can change these percentages to fit your needs and what you can actually afford. If you need to save more, you can increase the savings slice and lower the wants one. If your pay check barely covers your needs, you can allocate more than 50% to that part and do something like 70/20/10.
The "mandatory" technique
Another good way of saving money, is to consider saving as a mandatory expense, a need per se. Think of it as a bill you have to pay every month, and budget your life around that. You know that every month you'll need $X for rent, $Y for groceries, so on, and $Z for savings. Whatever's left on your pay check is for you, for your wants.
I hope this helped some of you out there. I, for one, like the mandatory technique, I've always tried to put something aside - no matter how small- every month, but I'm curious about the zero-based budget one, which I will probably start trying! Let me know in the comments which saving technique you like using or you plan on trying next!
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