Start Now—Everything You Should Be Doing to Save as Much Money Possible

Photo: Create & Cultivate

I’m going to humblebrag here; I’m pretty good at saving money. Moreover, I’m not the only one . According to this Fortune article, one in six millennials has at least $100K in savings. So what’s the trick? How do you make it easier to save?

I’ve tried numerous budgeting methods. Everything from detailed budget sheets that outlined where every dollar should go, to analyzing my bank statements each month to see where I can cut down on extra spending. As well-intentioned as these ideas are, I couldn’t stick with them. After a month or two, the task becomes tedious. Eventually, I’d give up and start over with another method, determined that this time, this one would stick.

Ultimately, saving money is not a complicated matter; you simply must spend less than you earn. A “good” budget is one you can maintain. Consistency is key. So how do you remain consistent? Automate your savings.

You need to make saving money as easy and automatic as possible. Otherwise, you’re not going to do it. The premise is straightforward: save a percentage of your income each month by diverting money directly into your savings account. That’s it!

But how much should you save? And how exactly do you do this? Read on to find out.

#1: Calculate Your Expenses

Total how much you spend on necessities — rent, food, utilities, gas/transportation, phone bill, etc. Next, determine how much you spend on optional, “nice-to-have” items or activities — clothing, entertainment, travel, etc.

#2 Find Your Net Monthly Income

This is the total amount of money you bring in after taxes. Subtract your total expenses from your net monthly income. How much is left? What percentage of your monthly income remains? Can you cut anything else to save a little more? Make sure to keep some wiggle room, however, because if you don’t, you will get fed up and won’t stick to the plan.

#3 Save 10–30% of Your Monthly Income

If you can save more, that’s great! If saving 10% feels likes a stretch, start small, even if it’s just $20 a month. However, I would challenge you to look at your expenses and really evaluate if all are necessary.

#4 Automate

Once you have this information figured out, the next step is to automate it.

If you get a monthly paycheck, send the percentage you’re saving directly into your savings account. The rest can be directly deposited into your checking account.

Here’s an example:

Monthly Net Income: $4,500

Monthly Expenses: $3,600

Remaining: $900

Automate. Move:

• $900, or 20% of your monthly net income to be directly deposited into your savings account.

• $3,600, or 80% of your monthly net income to be directly deposited into your checking account.

Now, you can spend what is your checking account (although that doesn’t mean you have to spend the entire amount each month). Also, don’t touch what is in your savings. Do everything you can to leave your savings account alone. Once your savings gets to a specific amount, take a portion and invest that money instead of keeping it in your bank account. That’s it!

A few words of caution: you might be tempted to manually put a specific amount into savings and checking each month instead of automating this task. Don’t do this. Why? Because you’re giving yourself a monthly task to do. And let’s be real, you’re not going to do this consistently. You’ll get busy and forget, or be tempted to put in $400 this month because of XYZ reasons.

Hold yourself accountable and automate this task. If you have to transfer money from your savings back into your checking account for a particular reason one month, that’s fine. However, make that a task you have to do occasionally, not the other way around. Limit the temptations to save less!

I’ve found this method to be the easiest and most straightforward way to save money each month. Experiment if this method works for you. Do you have another plan that works for you? Let me know! Leave a comment below or feel free to reach out to me on Instagram @KellieCockrell. In the meantime, cheers to saving money!

By: Kellie Cockrell

This post was originally published on November 6, 2018, and has since been updated.

Love this story? Pin the below graphic to your Pinterest board.

MORE ON THE BLOG

5 Ways to Prepare for Self-Employment

Photo credit: Sarah Natasha Photography 

Nowadays the term “entrepreneur” is part of our normal vocabulary, but no one striking out on their own becomes an overnight success. If you’re thinking about pursuing self-employment and running your own company, here are five ways to properly prepare yourself for setting out on your own. 

DO YOUR HOMEWORK

Self-employment is not for the faint of heart. If you are committed to pursuing the pros of working for yourself, you also have to be hyper-aware of the cons. As you contemplate leaving the financial stability of your corporate job, begin to evaluate the added stresses that come with being a company that is a party of one. For example, I thought critically about having to pay a very expensive health insurance bill every month where previously health insurance had somewhat silently been deducted from every paycheck.

"Self-employment is not for the faint of heart." 

Tweet this.

I determined that the stress of that monthly payment would be more worthwhile than the stress I was feeling from my corporate gig where I was feeling unchallenged and unfulfilled. I also looked at what I would be doing from a day-to-day basis that couldn’t be covered by a team. I’d be offering clients my services from the ground up and they’d all be handled by me - no delegating up or down on a team. By thoroughly researching what your new normal will look like, you’ll be in for less of a shock when you become accountable only to yourself.

 NETWORK 

By far the most valuable thing I did in preparing for self-employment was tapping into my network. I began seeding to my friends, family and acquaintances that I was planning to leave my job to consult and one by one my network grew.

Everyone wanted to put me in touch with someone who’d had the courage to do what I was planning to do. I began speaking to loads of other freelancers and consultants and I came prepared to every meeting with a list of questions. Every encounter held a powerful and helpful takeaway and the more people I spoke with, the more my network expanded and the more business leads I started to pull in. Those I spoke with also were incredibly valuable when it came to setting the costs for my services, determining what tools I’d need to invest in and helping to provide guidance on how to successfully manage my business. 

GET ORGANIZED OPERATIONALLY 

There’s a lot that goes into operating your own business and some of the things may even surprise you. Before you leave your job for the land of self-employment, I recommend starting to get the pieces of the operational puzzle in place. One of the first steps I took was finding a lawyer who could incorporate my business. Then I set up a business banking account so I had a checking and a savings account for the company and also a credit card for all expenses. I got set up on Quickbooks to run the financial side of my business and also built a forecast so I was setting goals for myself to meet from a revenue standpoint.

"Before you leave your job for the land of self-employment get the pieces of the operational puzzle in place."

Tweet this. 

Next came working with my lawyer to draft contracts and other necessary paperwork I would need to run my business from a client services perspective. I also developed a capabilities deck I could send to prospective clients, built a website, ordered business cards and developed a list of companies I was interested in speaking with. Once everything was done prior to leaving my job, it was easy to hit the ground running pursuing business because I had prepared all of my operational to-dos. 

PLAN FINANCIALLY 

Before you commence self-employment, you have to first accept that you won’t know from where your next paycheck is coming. Which translates to having to prepare financially for those inevitable times that you won’t have steady pay coming in. Knowing I lived in the most expensive city in the world, I put pen to paper to determine what living in New York was really costing me every month in regards to expenses. I signed up for a Mint.com account to build out a budget and for two months tracked my expenses. Once I had an idea of averages in particular categories, I built out an expense worksheet for myself that included rent, health insurance, groceries, travel, utilities, etc. I knew I wanted to have whatever that number was per month times six saved before I pulled the plug on my corporate job so that when the time came to dip into savings, I felt OK doing so.  

"Do the math and start saving accordingly before you up and leave your job."

Tweet this. 

Do the math and start saving accordingly before you up and leave your job. You’ll be far better off down the line for having done so.

THINK LONG TERM 

When you begin working for yourself you’ll feel like you need to say yes to whatever initial projects come your way because you fear the unknown. But when you accept projects or clients that you don’t feel passionate about, you’re defeating one of the best perks of being your own boss: the ability to say no. While you certainly need to pay your bills, you shouldn’t take on work that you don’t feel capable of delivering on or for people or brands that don’t make you feel invested in the work. If you begin to take on projects you’re not jazzed about, you are limiting the hours you have a month to pursue and accept jobs that will not only give you income but also fulfillment.

Meghan Donovan is the founder of mmd communications, a public relations and influencer marketing agency in New York City helping to elevate lifestyle brands with dynamic, meaningful ideas. In addition to her decade of experience in the marketing industry for major brands like Procter & Gamble and Virgin America, she also pens the popular life + style site, wit & whimsy. You can read more about her journey to self-employment here. 

MORE FROM OUR BLOG

The Best Financial Decisions to Make in Your 20s

Image credit: Becca Tapert

Mortgage-backed securities, sub-prime loans, traunches…. It’s pretty confusing, right? Does it make you feel bored or stupid? Well, it’s supposed to. Wall Street loves to use confusing terms to make you think that only they can do what they do. – “The Big Short”

Savings. Does the word send shivers down your spine?

As a Millennial, the (credit) cards may feel hopelessly stacked against you. Everyone said “go to college and a good job will easily follow.” No one prepared you for entering the workforce in the wake of The Great Recession. No one warned you about how long student loans would follow you. No one explained how truly tight life is on a entry-level salary. Living paycheck-to-paycheck often seems like the only way to keep your head above water. However, if you can master the art of saving at a young age, not only are you setting yourself up for a secure future, but you’re also building a powerful muscle of financial self-control.

Disclaimer: I am not a financial professional, just a young person who has worked to gain basic financial literacy.

Build an Emergency Fund

To move away from the paycheck-to-paycheck panic, focus on building an emergency fund. Truly audit your life, exploring what short-term sacrifices you can make. Brew your own coffee instead of buying a fancy latte. Funnel your entire tax refund directly into savings. Sell personal items you no longer use. Surely there’s something you can sacrifice, even $10 a week is better than nothing. You never know when you’ll have a medical emergency or car failure or suddenly become unemployed. However, the one constant with emergencies is they will happen to everyone.

Recommendations vary for emergency fund goals, but most advisers recommend saving 3-7 months’ worth of living expenses. Start small, focusing on just saving $1000. After your first $1000, shift gears to save the next $1000. Breaking this into small goals will make this feel more manageable.

Credit Cards

Don’t. Just don’t. There’s so much to be said on the topic of credit cards: How high interest rates will be your demise. That you should always pay them off in full. You don’t need more than one. You should avoid any with annual fees.

Credit spending will undermine your saving goals. If you’re drowning in credit card debt, then focus on paying off the highest interest rate debts first. Cut up the cards and throw them away. Paying off your 17% interest rate card is a 17% guaranteed return on investment for those dollars, way better than the return on a boozy brunch.

Start Saving for Retirement

Financial professionals everywhere advocate the value of starting a retirement account in your 20s. Touting the power of compounding interest, you’ll vastly multiply your investment if you start saving at 25 versus at 35. Once your emergency fund is healthy enough to protect you from catastrophe, start saving for retirement.

401(k)s – Employers regularly provide 401(k)s and often offer matching programs. Matched funds are basically free money, so sacrifice as much as you can from your paycheck to take full advantage of these. Not doing so means leaving cold hard cash on the table.

Personal Retirement Accounts – If your workplace doesn’t offer 401(k)s, consider opening a personal retirement account. There are many options: IRA, Roth IRA, HSA’s, etc. Talk to a personal investor about your best option, but make sure your investor is a “fiduciary,” which means they’re legally obligated to act in your best interest.

"No one explained how truly tight life is on a entry-level salary."

Tweet this. 

Start Saving for Goals

After establishing an emergency fund and retirement savings, you can now save for life’s big purchases. Maybe you want to buy a car, go on vacation, or plan for your wedding. When your friends post magical pictures of what’s going well in their life, it’s easy to get caught in the Instagram jealousy game. Don’t forget, they had to pay for that photo, and many them are doing so with credit cards. No amount of Instagram likes will feel better than paying for a major purchase in-full and with cash.

Be Smart with Extra Income

If you get a raise, bonus or any other unexpected extra income, divert that directly into savings. You’ve already figured out how to live at your current salary. You won’t even notice the difference, but your savings will thank you for the bump.

Fall in Love with Finance

Recently over dinner with my best friend, she mentioned how she’s become fascinated with finance and loves talking about retirement plans with her co-worker. I enthusiastically revealed that it’s also become so exciting to me. We’re total finance nerds.

"No amount of Instagram likes will feel better than paying for a major purchase in-full and with cash."

Tweet this.

There’s a whole world of helpful resources out there to self-educate yourself on personal finance.

If financial personalities interest you and you want to know, “can I afford it?” Suze Orman is a hoot. Dave Ramsay also educates with charisma, breaking financial freedom down into digestible baby-steps.

Maximize your daily commute by listening to economic podcasts. Planet Money and Freakanomics make big economic theories personal by connecting humanized stories to tales of dollars and cents. The Minimalists focus on living within your means and pepper amazing financial wisdom throughout.

If you prefer films, The Big Short is fascinating. Last Week Tonight often covers finance while also cracking you up, like this segment on Retirement Accounts. If you prefer documentaries, check out Frontline: The Retirement Gamble.

Surround yourself with the vocabulary of economic theory and personal savings and before long you’ll become fluent in finance. You might just fall in love with savings.

Do finances overwhelm or excite you?

An original version of this article appeared on Darling. Written by: Talitha Baker.  

MORE FROM OUR BLOG