Always Broke? Small Changes to Save You Money Each Month

Living paycheck-to-paycheck can hinder your ability to save for future goals. It's easy to find yourself taking out costly short-term loans or carrying balances on high-interest credit cards -- but these quick-fix solutions often make matters worse. You have the power to take control of your finances, often simply by making a few small changes each month that can really add up over time.

Reviewing Your Spending

If you’re not tracking your spending, it’s easy to get overwhelmed, because you don’t know where all your money is going. According to Ben Wacek, a certified financial planner and founder of Wacek Financial Planning, LLC, “My clients who begin to track their spending see huge differences in their financial life. The changes that can be made are incredible once someone understands exactly where their money is going on a monthly basis.”

Once you can view your spending, you can see which expenses are going to be easiest to cut. “Often times an even less painful way is to look for unused or underused services clients pay for,” suggests Jesse Bunse, a financial planner with Triune Financial Partners, LLC, in Overland Park, Kansas. “A popular one currently is cutting out cable and using lower cost Internet-based options. If you are paying for a gym membership -- go to the gym. If you are not, quit kidding yourself and cut this expense!”

Creating Additional Income

Cutting expenses is only half the equation for changing your financial bottom line. “There are only two ways that you can increase the funds available to save each month: spend less or earn more,” says Wacek. “Both of these methods take effort and creativity but can be done.” If you have the time to take on an additional side job, Bunse recommends, “Finding something that you enjoy that can make a little extra money can be a great way of increasing income with little or no pain. An example may be a hobby that can generate some extra income. There are many stories of successful businesses resulting from what used to just be a hobby.”

Solidifying Your Savings

 

Once you’ve made a budget, you can take additional steps to make sure that you're saving rather than spending. "Living on a budget is essential to ensure that you actually follow through on saving the money that you set out to save,” says Wacek.

“Setting up an automatic transfer to a separate savings account can help to keep these savings from ‘evaporating’,” notes Bunse. “This also has the added benefit of showing people just how much they are saving and how little it is impacting their day-to-day life. Another great strategy once these expenses are cut is increasing contributions to employer sponsored retirement plans. Even a small increase has an enormous impact over time.”

Starting Small Can Make a Big Difference

No amount is too small when it comes to getting the ball rolling on your savings. “Putting some simple math to it, an extra dollar invested as part of a properly allocated portfolio can double several times over a few decades,” notes Bunse. “For a person in their early 20s investing this in their 401(k) at work, a single dollar could double four to five times in their working career.”

Warcek agrees: “If a 25-year-old were to save an extra $50 each month -- less than the cost of most cable and cell phone bills -- until their age 65, they'd have an extra $174,000 at their age 65, assuming an 8 percent growth rate. Imagine the same 25-year-old were able to save $100 ... or $500 each month. The best way to build wealth is to spend a little bit less than you make, save the difference, and repeat year after year after year. Many small decisions today result in significant results over time.”

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