A brief guide to saving money


Personal FinanceLet me start by giving you some advice on personal finance that I have learned over the years. The simple fact is that there are no shortcuts to saving money and doing well financially. Wealth must be built up over a long time. But on the other hand, you must have a plan to become successful. Even a simple plan will do. In fact, when it comes to personal finances and saving money, a simple plan is sometimes the best, since they are easy to remember and easy to follow.

Let’s start by talking about income. We all make a different amount of money, but unless you are living under the poverty level, you should still have some money left over to save. A good number to start with is 10 or 15% of your income. I always advocate putting away this money automatically into a retirement account, so you can’t touch it at all. If you don’t have an emergency fund, you’ll also want to create one, and have about 6 months of living expenses saved in your fund. This way, should you lose a job or encounter some sort of life difficulty, you won’t have to go into debt. Discipline is key to making any kind of savings plan work.

Next, you should work to get rid of all debt, except for mortgage debt. Most credit cards charge a very high APR, and this literally eats away at your money. Cutting down on debt takes years, and requires a good amount of planning. I recommend using calculators such as the one at CNN money to help you calculate how you can get yourself out of debt. If you don’t know much about debt, it’s also a good idea to talk to a knowledgeable friend or a debt counselor so you will better understand why it’s so important to reduce your debt levels.

But learning to save money is only half the equation. In order to get to a point where you have money to save, you also need to learn ways to cut down on your spending. Most of us spend way more than we need to, and this is not that difficult to change if you put your mind to it. Let’s go over some basic things you can do.

First, always looks for deals online when you are shopping. I’ve found over the years that whatever I wish to buy, I can almost always find a better price online. Good places to look for deals are large e-commerce sites like Ebay and Walmart.com. Look for free shipping deals if you can, and also make sure you search for online coupons, which can instantly slash the amount you pay for a given product. Familiarize yourself with deal websites and coupon websites, and bookmark your favorite ones. A couple good sites to help you get started include retailmenot, coupon.com, and my favorite, http://couponleaf.com/.

Get into the habit of comparing prices before making a purchase. This can be a bit of a hassle if you like shopping at physical stores. But shopping apps are giving consumers more and more power. If you shop online, it’s a great idea to bookmark some price comparison sites. They should be the first place you go to when you’re thinking about making a purchase.

Next, you should cut down on unnecessary spending. Do you really need 200+ cable channels? How many channels do you actually watch? Many Americans are getting rid of cable altogether. This doesn’t mean you have to forgo watching TV altogether, since many programs are now available online on sites like Netflix and Hulu. There is also a new site called Sling that allows you to watch dozens of popular cable channels for just $20 per month. If you are interested in this option, consider reading this Time Magazine Article on cutting the cord.

Make sure you also watch this CNET video if you’re thinking about doing without cable:

Another thing you can do to cut down on your expenses is begin buying used goods. Some people balk at this, not wanting used items. But think about all the waste that is created by people not taking advantage of used items. Places like Goodwill and Craigslist are great resources for finding used items. You can often get terrific deals on things like furniture, bicycles, and electronic items by using such resources.

Last but not least, try eating out less. This includes visits to places like Starbucks, where you end up paying a rather astronomical amount for coffee. A meal prepared at home may only cost a few dollars, but if you go out, it can easily end up costing $30 or more. This doesn’t mean you have to stop eating out altogether. It’s always a good idea to treat yourself once or twice a week. But many of us eat out almost daily, and this can be a serious hit to your financial well-being.