In June 2013, my father passed away. It wasn’t totally unexpected. He had diabetes, his health had been declining, and earlier that year, the doctor said his kidneys were failing. However, I was still shocked when my brother called me to let me know my father passed away. That week was stressful as we hurried to make funeral arrangements and clean out my father’s apartment. But the biggest stress was the financial burden of the funeral that fell upon me and my three siblings. (You can read the full post on on Money Saving Mom).
We had to come up with $7,000 to cover the funeral costs. Luckily, we were able to split up the cost between my siblings and uncles. That still meant that my family needed to pay $1,000. Thankfully, my husband and I had an emergency fund to pull from to cover our portion of the funeral. If we didn’t have an emergency fund, the financial burden would have been placed on my siblings or we would have had to put it in a credit card and go into debt.
It was a huge blessing that my husband and I made the decision years ago to build up an emergency fund. You never think something will happen to you until it does unexpectedly. It can happen to anyone at any time. It might be the death of a loved one, an unfortunate hospital visit, or a job layoff. What’s important is that you’ve planned for these unexpected events by having some savings. This is your financial cushion in case something goes wrong and you need to access money quickly. If you already have an emergency fund, it’s still important to continue setting money aside in savings so you can pay for items that your family needs or even wants without having to use a credit card and go into debt.
According to a study by Bankrate.com, more than a quarter of consumers have no emergency savings. It’s recommended that you put away at least three to six months’ worth of living expenses. If you have debt, the first step is to save $1,000 in an emergency fund, then start eliminating debt. Once your debt has been eliminated, then you can continue to build your three to six month savings. Here are ways to save money so you can increase your savings this year.
Tip #1 – Have a Plan and Set Goals
Think about what you are saving for. Is it an emergency fund? Is it extra money to pay off debt or pay down your mortgage? Or is it a family vacation? Once you know what you want to save for, then prioritize which one is the most important to you.
Now examine your financial situation, income, and needs. In other words, create a budget or a “spending strategy.” We all spend money each month, but a spending strategy will help you spend your money more wisely. Based on your spending strategy, figure out how much you can reasonably put towards savings each week or month and set some financial goals. These goals need to be achievable and have a time frame. And the goals need to be broken down into smaller goals.
For example, if you want to save $6,000 within one year (which would be a three-month emergency fund for your family), that breaks down to $500 per month, or $125 per week. So you would need to find an extra $125 in your budget each week in order to build a three-month emergency fund within one year.
Saving $125 each week, or whatever your goal is, may seem impossible because there are bills to pay such as the mortgage, utilities, groceries, a car payment, and possibly student loans. You may be thinking that you would like to save, but there’s just no money left at the end of the month. And that’s the problem. Most people save what’s left over after bills and discretionary spending. But by prioritizing, it’s possible to save that $125 a week or come close to doing it. This leads to Tip #2.
Tip #2 – Pay Yourself First
To pay yourself simply means that before you pay your bills, buy groceries, or spend any money, first set aside a portion of your income to save. You can make it easy by automatically depositing an amount or percentage of your paycheck into a savings account. If you arrange to have the money taken from your paycheck before you receive it, then you will get used to managing living expenses with what looks like a smaller paycheck. Most importantly, stay consistent and treat the money you’ve saved as if it is off-limits, except in a real financial emergency.
One benefit of paying yourself first is that you are encouraging sound financial habits. Most people spend their money in the following order: bills, discretionary spending, saving. It’s not surprising that there is usually little left over to place in the bank. If you turn it around and put it in this order: saving, bills, discretionary spending, then you are able to save the money before you spend it.
Almost everyone can save 1% of their income. Say your family’s monthly take home is $2,500. Saving 1% would be $25. Saving such a small amount may seem pointless, but it’s helping you to grow your savings. Plus, the process is painless. If saving 1% is easy, then try saving 5% or 10% a month. It depends on your financial situation and what you feel you can reasonably put toward savings each month.
Tip #3 – Cut Down Extra Expenses & Trim Unnecessary Spending
Prioritize which expenses are most important to you, then decide what you can get rid of such as cable or additions on your cell phone. If you decide you can manage without premium cable channels, then update your plan the next time your contract is up and put the difference toward your savings goal. For our family years ago, every time I saw our cell phone bill I cringed. I knew something had to change. So we shopped around and found a different cell phone provider and a plan that worked for our family. By making this change, we were able to save $70 a month, which adds up to be $840 a year!
Be sure to also cut down on discretionary expenses. This includes dining out, buying expensive clothes, going on pricey vacations, and other unnecessary expenditures. If you get manicures regularly, maybe don’t do it one month and put that money into savings. Maybe you can stretch the time you go to the salon by going every six to eight weeks rather than monthly. For our family, we can easily spend $25 just to eat out at a fast food restaurant. Maybe try eating out less often and cut it down to just once or twice a month. For those of you who work, take a lunch to work rather than running next door and grabbing a sandwich. With the money you would have used to eat out, put it into your savings.
Also little indulgences can add up such as regularly purchasing a soda from the convenience store or adding treats and snacks to your grocery shopping cart when they weren’t on your list. Aim to scale back small purchases. It’s amazing how much you could save in a month just by making a few changes.
If you feel you are already living from paycheck to paycheck, then start small by cutting back on expenses and looking for ways to generate extra cash. You might also consider using this year’s tax return to get your savings off to a great start.
For our family, we like to use our tax return to go on family vacations or pay down our mortgage. And some years we put our tax return in savings. For instance, this past year we recently added a third child to our family. We knew we wanted a larger vehicle because trying to get all three children buckled in car seats in the back of our car has been challenging. A few weeks ago we were able to purchase a new-to-us vehicle and pay cash for it. It was not an easy thing to do. We spent years building up our savings so we could purchase a vehicle with cash and so that we didn’t have a car payment. Sure, it would have been easy to just go purchase a new car with a monthly payment plan, but financially it would have been stressful on us because we would have needed to come up with $200 or $300 more dollars each month just to pay for the car. Instead, we planned ahead and were patient until we found the right car within our price range. I realize that this may not be an option for everyone, like if your car breaks down unexpectedly and you need to get a new car, but I’ve learned that if you can plan ahead and save the money needed to purchase something in full, it feels great because there’s not that stress or burden of debt.
Tip #4 – Buy Groceries on a Budget
Except for the mortgage, groceries are the highest monthly expense, and the average family spends more than $6,000 a year on groceries. There are some monthly bills that you can’t control such as the mortgage and some of the utilities, but you can control the amount of money you spend on groceries. Here are a few tips how to buy groceries on a budget.
A. Determine a Budget
First, evaluate what you have spent on groceries during the last month and then take an average. Slowly challenge yourself to start cutting 5% here and there from your grocery budget. Within 8-10 months, it’s possible to have lowered your grocery bill by 30% or more. Be sure to set a realistic budget so you don’t get discouraged and give up. You want to be able to persevere and see the long-lasting benefits.
I’ve increased my budget since adding more children to our family. For our family of five, our budget is about $350 a month, and that includes food, household items and personal care. I usually only spend about $250 a month at the grocery store, and then with the rest of the money, I use it to purchase items at case lot sales or to pick up bulk items at a warehouse club such as Costco or Sam’s Club. Each family is different so determine a budget that will work for you.
To save money on your groceries, you don’t need to be a crazy coupon lady. I’m not one of those ladies with stacks of coupons and a massive coupon binder. My coupon pouch is small. I enjoy finding good coupons and deals, but it’s important for the every-day person to know that they can save money on groceries without spending hours and hours of time clipping and organizing coupons.
B. Plan Out Meals
Before heading to the store, be sure to plan out your meals. Just by taking 15-20 minutes each week to plan out your family meals for one to two weeks will save on your budget. If you don’t plan out family meals, you are more likely to run to the store every few days, if not daily, to pick up items for dinner. The more you enter the store, the more likely you will add extra items to your shopping cart that you don’t need. And you’ll end up paying full price for the items rather than picking them up when they are on sale.
C. Find Sales and Stack Coupons
The way to save the most money on groceries is to watch for a sale on a product, preferably when it is at its rock-bottom price, which is the lowest price you’ll see it, and then purchase it using a manufacturer coupon and/or an in-store coupon. For example, Walgreens had Purex Laundry Detergent on sale for $2.99. I had a $1.00 off Purex Walgreens in-store coupon. I also had a $1.00 off Purex manufacturer coupon. With the sale and two coupons, I was able to get it for just $0.99!
Begin to practice the “Buy Ahead Principle,” which means to try to never pay full price for anything. By being patient and watching for sales you can buy most items at a discounted price. When an item reaches its rock-bottom price, don’t just buy one item. Purchase as many items as your grocery budget will allow to keep you stocked until the next sale. Keep in mind that most sales re-occur about every 12 weeks.
And don’t go out and spend hundreds of dollars now to begin building a stockpile. Instead, designate a small portion of your grocery budget to buy extra discounted items that you will use in the next few months. Even $5 or $10 a week devoted to stocking up on discounted items can go far. If you don’t find any really good deals one week, save your money for the next week.
And remember that time is money. Don’t feel like you need to hit every deal. Just focus on the best deals that week for the items you need.
D. Price Match
Each week, I post the best Grocery Deals to Price Match list for northern Utah. I look at about ten grocery stores and compile a list of the best deals for that week. By shopping at one store, I’m saving time and money because I’m not running around to multiple stores. I place the produce, dairy, and meat deals first on the list because having healthy meals for my family is important. And every week, there are produce and dairy items on sale that you can price match so you don’t need to always pay full price for those items.
I recently received a message from a lady who began to price match using the price match list I compile weekly. She said she saved $25 at the grocery store that week. I was excited for her! It may not seem like $25 is that much, but if she saved $25 each week, that would be $100 a month. If one of her goals was to increase her savings, and if she put that $25 each week toward an emergency fund or savings, she could save about $1,200 a year. It all adds up!
You can read more about How to Buy Groceries on a Budget here.
Tip #5 – Become a Savvy Shopper
Part of being a savvy shopper is knowing when and where to buy something and if it’s a good price. Before you purchase something, think about whether you could instead make it yourself, get it used, fix it, do without, or find a less expensive alternative. Many times, not buying anything at all will save you more than buying something on sale. For items you purchase less frequently or for larger items, such as an automobile, appliance, or furniture, be sure to do your research online and at a few different stores to find the best deal. Before heading to a store to shop, see if there is a coupon you can take with you. And before eating out, always search online for coupons or deals.
Think before you buy anything by asking yourself these three questions:
- Is this item a necessity?
- Can I absolutely afford this item?
- Have I done everything that I need to do to ensure that I’m getting the best price?
Here’s one example of how I researched online to find a better deal. I used to pay $50 a box for contacts (which is a 3-month’s supply) by ordering them from my eye doctor. However, I did my research and found that I could purchase the exact same box of contacts on VisionDirect.com for half the price and only spend $26. If I wore glasses, I found deals at Coastal.com to get generic frames and lenses for just $20. The reason they can sell them inexpensively is because they sell them directly and don’t go through a middle man. Many times Coastal.com has promotions to get your first pair of glasses free. Read more about Tips to Save Money on Glasses and Contacts here.
Tip #6 – Don’t Push Yourself Too Hard
When setting a financial goal, push yourself past your comfort zone, but be realistic. The goal is to succeed! If you fail within the first week, you’ll give up and say that you aren’t good at budgeting and saving money. However, if you don’t develop the saving habit now, there are always going to be reasons to delay. It’s all about taking baby steps in the right direction. Chip away at your savings goal a little at a time. Think of your goal as a marathon rather than a sprint. Be steady, and be consistent. Learning and doing this is like exercising a new muscle, yet it’s possible to do it. It just takes time.
Once you’ve reached your goal, reward yourself. I’m not saying to go out and blow the money you saved, but have a small reward in mind when you achieve your goal. This could be something enjoyable for you or for your family.
Even though I have a savings blog, I’m not a penny pincher. We go out to eat without using coupons sometimes. We do fun outings as a family. The reason I save money is so we can splurge on things we enjoy or that are important to us, because life is about enjoying things that matter most. I hope these ways to save money will help you increase your savings this year. What other tips do you have to increase your savings?