One of the most important financial lessons a person can learn is to live within their means. The problem many people with excessive debt have is spending as much (or more) than they make – and then having to lean on credit cards and other sources of credit to make ends meet.
One of the most effective methods of saving money is learning how to live on less than you make. Here are tips to learning to live on 70% of your income, which means you can put 20% of your income in the savings vehicle of your choice:
1. Figure out what you’re currently spending money on by tracking every incoming and outgoing dollar for a full month. If you’re not already keeping a close eye on your spending, this will be an enlightening experience. If you find your income just isn’t enough, do something about it! If you’re spending too much on unnecessary items, do something about it!
2. Look at what you are spending your money on, for example – if you tend to spend a lot of money on coffee on the way to work, start making coffee at home. You’ll read this tip on every money saving blog and website you come across but the fact is, buying coffee out is something many people do without a second thought and the money absolutely adds up.
3. Learn how to make your favorite meals at home and avoid eating in restaurants or getting take-out. Doesn’t mean you can never have a treat, but for families who eat out frequently, you can use far less of your food budget by making food at home rather than going out.
4. Buy items in bulk whenever the prices are discounted for doing so and the items will not expire or be wasted. Good candidates for buying in bulk include paper towels, toilet paper, canned goods and juice.
In order to increase the amount of money you have available to save, you need to decrease the amount of income you’re using. Working toward the goal of living on 70% of your income (or less!) will help you grow a healthy savings account.