How to save money successfully

Many of us have hard time-saving money, despite our best intentions. We often start with good intentions, but then something comes up, and we end up spending what we intended to save. If you’ve been struggling to save money, here are some tips that might help you finally reach your goal.

Record your expenses

If you want to save money successfully, one of the best things you can do is to keep track of your expenses. This will help you to see where your money is going and where you can cut back. Several ways to do this include using personal finance software like iCash, setting up a system of envelopes for cash expenses, or simply writing out your monthly spending. Find what works for you and stick with it!

Find ways to save money on everyday expenses

We all know that saving money is essential, but it can be challenging. Here are some tips to help you save money on your everyday expenses.

1. Make a budget and stick to it. This is probably the most important tip. You need to know how much money you have coming in and going out every month. Once you have a budget, try to find ways to cut back on your spending.

2. Take advantage of discounts and deals. There are often discounts and deals available if you take the time to look for them. Whether using coupons at the grocery store or taking advantage of sales, you can save a lot of money.

3. Save on transportation costs. If you can, walk or ride your bike instead of driving. This will save you money on gas and parking fees. If you must drive, carpool when you can or look for ways to consolidate your errands to save on gas.

4. Cut back on eating out. Eating out can be expensive, so try cooking at home more often. You’ll save money and may even end up eating healthier as well.

5. Save on entertainment costs.

Make a budget

When saving money, one of the most important things you can do is create a budget. You can make informed decisions about where you can cut back to save by taking the time to figure out where your money is going. There are several ways to approach budgeting, but it is straightforward to track your monthly spending and categorize it into essential and non-essential expenses. You can start looking at ways to reduce your non-essential spending to boost your savings.

iCash allows you to create budgets, making the process easier. Still, it comes down to being mindful of your spending and making deliberate choices about where your money will go. If saving money is a priority for you, then creating a budget is a great place to start.

Invest in yourself

Investing in yourself is one of the best ways to save money successfully. When you invest in yourself, you are investing in your future. You are also more likely to be successful if you invest in yourself. There are many ways to invest in yourself. You can invest in your education, health, career, and relationships. All of these things will help you to be more successful in life. Investing in yourself is one of the best ways to save money successfully.

Automate your savings

One of the best ways to save money is to automate your savings. This means setting up a system where a fixed amount of money is transferred from your checking account to your monthly savings account. This can be done manually, but many financial institutions offer automated savings programs.

There are several benefits to automating your savings. First, it forces you to save regularly, which can help you reach your financial goals more quickly. Second, it enables you to avoid the temptation to spend money that you should be saving. And finally, it can help you build up your savings more quickly than if you were making occasional deposits.

If you’re not already doing so, automating your savings is a great way to save more monthly money. It’s easy to set up and can make a big difference in your financial picture.

Live below your means

One of the best ways to save money is to live below your means. This means spending less than you earn and living a more frugal lifestyle. There are several ways you can do this, such as:

-Reducing your expenses: Take a close look at your spending and see where you can cut back. This may include cutting out unnecessary expenses, like eating out or buying new clothes all the time.

-Making a budget: A budget can help track your spending and ensure you live within your means. Try to stick to your budget as much as possible.

-Earning extra income: If you can earn extra income, this can help you boost your savings. You can get a part-time job, start a side hustle, or invest in passive income opportunities.

Saving money successfully takes discipline and effort, but it is well worth it. Following these tips can start saving money and reaching your financial goals.

Conclusion

Saving money is a skill that anyone can learn with a little bit of effort. If you’re struggling to save money, start by evaluating your spending habits and setting a budget. Once you have a handle on your finances, set some savings goals and create a plan to reach them. Remember, saving money is about making small changes in your spending habits over time. You can develop the skills necessary to save successfully with dedication and perseverance.

Recommended reading:
– What is Personal Finance?
– How to take advantage of Budgets in iCash

Personal Finance, what’s that?

iCash is a personal finance software intended to keep track of your incomes, expenses, credits, debts and Banks transactions for you. But what does ‘Personal finance’ actually mean?

Personal finance is the application of the principles of financial economics to an individual’s (or a family’s) financial decisions. It asks, “How much money will you need at various points in the future?” and “How do you go about getting that money?”. It deals with questions like:

• What is my annual income?
• How can I increase my income?
• What are my annual expenses?
• How can I reduce my expenses?
• How do I best budget my available income each year?
• How much money can I save each year?
• How much will I accumulate over my working lifetime?
• Will this be enough to support me after I retire?
• How much will it cost each year after I retire?
• How many years will I be retired?
• How do I pay for large expenses (like children’s education, or buying a house) when they arise?
• How can I reduce my financial risk? Through insurance? Through pensions?
• What do I do with the savings that I have accumulated? What is the best way of investing this capital?
• How much debt do I have? What are the monthly debt servicing payments?
• What is the value of my assets?
• What effect will taxes have on these issues?
• How do I minimize the taxes I must pay?
• What effect will inflation have on these issues?
• How will these issues change as I go through the stages of my life?

A Question of Time

Personal finance is a detailed analysis of financial flows at various points in time. For example, we may receive employment income today, but have to pay college tuition fees next year. Mortgage payments, interest earned, insurance premiums, and numerous other financial flows are recurring events that repeat at monthly or yearly intervals. Because these involve several time periods, we have to ask “What role does time have in these financial calculations?”.

We know that if we deposit money in a bank account we will receive interest. Because of this, we prefer to receive money today rather than in the future. Money we receive today is more valuable to us than money received in the future by the amount of interest we can earn with the money. This is referred to as the time value of money. To adjust for this time value, we use two simple formula. The present value formula is used to discount future money streams, that is, to convert future amounts to their equivalent present day amounts. The future value formula is used to convert today’s money into the equivalent amount at some time in the future.

All personal financial planning done by professionals uses these time value formula, as well as several more complicated variants of the formulas. To ignore the role that time plays in financial planning is to ignore one of the most important principles of personal finance.

The financial planning process

The financial planning process is a dynamic process that requires regular monitoring and reevaluation. In general, it has five steps: (assessing your situation, setting goals, crafting a plan, taking action, and monitoring your progress)

1. Assessing your financial situation is usually done by compiling several lists. These lists are simplified versions of corporate balance sheets and income statements. On your personal balance sheet, you list all your assets (e.g., car, house, clothes, stocks, bank account) and give their values. You also list all your liabilities (e.g., credit card debt, bank loan, mortgage) and give their values. Subtracting your total liabilities from your total assets will indicate your personal net worth. To understand how your personal net worth will change in the future, you compile what is called a personal cash flow statement. This lists your income, and your expenses. By subtracting your expenses from your income, you obtain your net cash flow for the period. If your net cash flow is positive, your personal net worth will increase. Most people grossly underestimate how much they spend each year.

2. Setting goals gives your life a financial direction. Examples of financial goals are: “To retire at age 50 with a personal net worth of $800,000”, or “To buy a house in 3 years paying a monthly mortgage servicing cost that is no more than 25% of my gross income”. It is not uncommon to have several goals, some short term, and some long term.

3. The financial plan details how you will accomplish your goals. It could include for example, reducing unnecessary expenses, increasing your employment income, or investing in pork belly futures. However you plan to do it, detailed calculations have to be made for each period (usually yearly). The effects of taxation and inflation must be considered.

4. When you have decided on the best plan for your goals and circumstances, you implement it. This involves taking specific actions. It often requires discipline and perseverance. Many people obtain assistance from professionals such as accountants, financial planners, investment advisors, and lawyers.

5. As time passes, it is important to monitor your progress. If it looks like you will not obtain your goal, you can either alter your plan or adjust your goal.

The financial life-cycle

On our journey through life we tend to go through stages. The stage we find our self in will have an impact on our financial planning. Modigliani and Brumberg (1954) devised a model to explain these stages. Here is a simplified version:

1. Individual supported by parents

• income very low
• few financial decisions

2. Young single

• income barely matches expenditures – no significant savings
• financial decisions tend to be mostly short term
• purchase car, clothes, music systems
• budgeting is important

3. Young couple, no children

• income greater than expenditures – some savings
• purchase home furnishings
• purchase home

4. Couple (or individual) with children

• income approximately equal to expenditures
• upgrade house
• purchase children’s toys, clothing, and supplies
• purchase life insurance
• college tuition expenses
• debt management is important

5. Empty nesters

• income greater than expenditures
• purchase investments
• retirement planning is important
• tax considerations are important

6. Retired

• income less than expenditures
• live off of savings
• purchase medical and nursing services
• estate planning is important

These financial activities need not occur in the stages as described. In fact, it is beneficial to do many of them as early as you can. Estate planning, investment planning, and retirement planning should all be done as soon as possible.

References

• Modigliani, F. and Bumberg, R. (1954) Utility analysis and the consumption function: An interpretation of cross-section data, Post Keynesian Economics, Rutgers University Press,1954.
• Kwok, H., Milevsky, M., and Robinson, C. (1994) Asset Allocation, Life Expectancy, and Shortfall, Financial Services Review, 1994, vol 3(2), pg. 109-126.
• Milevsky, M. and Robertson, C. (2000) Self-annuitization and ruin in retirement, North American Actuarial Journal, 2000, vol 4(4).

More information at Wikipedia

—
Stan Busk – Software Engineer
at www.maxprog.com

How iCash helps me save money

The iCash manual starts with the following: “The first step in getting your finances under control is keeping records!”, I wrote that sentence a long time ago, actually before entering 16 years of data into iCash! Now I am the happy owner of information, 3 lustrums of data at my fingertips. All about my economy, incomes, expense habits, loan and mortgages repayments, etc.

I believe January is the Personal Finance month. It is the time for budgetting. It is when you see what you did the previous year and what your goals are for the next one. It is also when you look at your spendings, especially the fixed ones. Since you entered everything in iCash you can easily find out what your money was used for, how much you really earned and what’s left.

Do you remember the formula: Wealth (what’s left) = Incomes – Expenses ?

Well, if W (Wealth) is low you have two solutions, you either increase I (Incomes) or decrease E (Expenses). Not everybody can increase its incomes but almost everyone can lower its expenses. Yes, believe me! Look at your iCash reports and charts. I am sure you are paying too much in electricity, phone, water, cable TV or whatever. Look at your invoices, sure they include things you no longer need. Look for mistakes so you don’t repeat them. Take a few hours to analyze your fixed spending invoices and other important expenses. You will be surprised. So yes, you have been collecting and entering data, now it is time for analysis and decision making.

Decision making definition: The thought process of selecting a logical choice from the available options. When trying to make a good decision, a person must weight the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation.

In my particular case and as an exemple, after checking my phone bill, I found out I was paying around $15 in useless features. I cancelled them all. That represents a clear $180 saving for the year(s) to come. I actually found lot of useless stuff I was paying for nothing. Then you can check your electricity and water bills, there are lots of ways to reduce consumption. I have decided to set limits.

You can’t manage what you can’t measure. So remember, the first step in getting ones finances under control is keeping records. With iCash I am able to view my daily, weekly and monthly incomes and expenses anytime. I can monitor my spendings, understand my household consumption habits and adjust them to reduce on the monthly bills.

—
Stan Busk – Software Engineer
at www.maxprog.com