In your twenties, when you are just experiencing having your own money, it’s very hard to not spend it all. Here’s our guide to saving up.
Why lazy? The way I see it, we don’t want to invest hours and hours studying different return rates on savings accounts or trying to understand investments and the stock market. We want simple tips that we can action today and have more money in our pocket tomorrow, with little or no effort.
I believe there are two ways to save more money:
#1 Make more money, and maintain the same lifestyle. Or at least, income growth beats expenditure growth.
#2 Put more money away from what you currently earn by spending less.
Both strategies will lead you to having more money saved up, so let’s contrast them and see which the better option is.
Earning more than you spend
This is the ideal situation, but it is also the least within your control. If you work for yourself, then you can follow this route and ensure that your spending increase does not keep up with your earning increase. If you are employed, this is at the mercy of your company, and thus, not a good strategy to bank on.
Saving more and spending less
This is totally within your control, and it is therefore the best option for you. How much money you spend is easy to measure, easy to control, and easy to change.
It’s an interesting human condition that we will adjust our spending up or down to match the amount of money we have available. If more is available, we will almost certainly spend more, without any greater benefit or an increase in happiness. Likewise, if less is available, we will easily scale our lifestyle down, again without much interference, assuming that our essential needs are covered.
How to have more money saved up in your twenties
These general tips are easier said than done. That’s why we’ve compiled a list of ways you can ensure that you’re able to save money, no matter how much you earn.
#1 Use your savings account to actually save. Open a savings account, and automatically pay a percentage of your income into it at the start of each month. Do this before you pay for anything else.
10% is usually a good place to start, and you will find that by never having the money “in your hands,” you will easily adjust and not miss it. It happens automatically, and you will never see the money, so it is zero effort once it has been set up initially.
#2 Cut up your credit cards. Buying things on credit just keeps you in a constant loop of debt, unnecessary purchases, and no savings. If you do not have enough disposable income to pay cash, you cannot afford it. Life will go on without the latest iPhone, the brand new car, or Rolex watch.
Just remove the option completely by getting rid of your cards. Trying to use will power to choose not to use your card is going to be difficult, and you’re likely to cave in. Make life easier for yourself by not having the option in the first place.
#3 Pay off debts ASAP. Debt is just incurring interest that weighs you down. Before you worry about growing your savings, you want to plug the holes leaking out of the bottom. Make it your primary focus to get rid of debt as quickly as possible. This way, you are not fighting a losing battle against interest payments and putting in effort that is not getting you anywhere.
#4 Get a roommate. Living on your own is expensive and inefficient. Half the rent on a two-bed flat will be a lot cheaper than the full rent on a one bed flat. Split the cost of rent, food, and bills between two or more, and you will instantly have more money to play with. On top of that, you even have someone to split the housework and chores with – an extra bonus for you.
#5 Stop paying for crap you don’t need. How often do you watch those 7000 TV channels? If the answer is not very, then cut the cost, and have a basic TV set up with a Netflix account. You have just as much access to the things you actually want to watch, without the expense. It’s much easier to remove fixed expenses like this than it is to try and budget for variable expenses like food or nights out.
#6 Buy and prepare your food in bulk. You will get discounts on bulk buying and by preparing food in advance rather than grabbing takeout food every day, you will cut your food bill in half instantly. You’ll be able to save up without having to forego eating out at restaurants occasionally. Just prepare your breakfast and lunches in advance rather than buying them on the go. Less trips to the grocery stores makes life easier, too.
#7 Look at your bills and bank statements. For years, I used to be scared to look at bills and statements. I would see how much money was in my account, but never break down what I had been spending. Sometimes, I wouldn’t even want to look how much money was there, especially if I knew I had spent a lot of money on a night out. This avoidance is not helping you at all.
You don’t need to actively do anything, just by looking at the statements, you will be more aware of the reality, probably feel guilty for wasting money on superfluous things, and subconsciously be more likely to not repeat it. Avoiding looking just keeps you in the cycle of repetition. Knowledge is power when it comes to your financial situation, and you have to be honest with yourself if you want to move forward.
#8 Set limits and boundaries. Give yourself a target expenditure on certain things, and then remove the option to go over it. For example, budget $100 for a night out, withdraw the cash, and then leave your cards at home.
You now have no choice, you only have the money that is in your pocket, and you cannot spend any more. Again, you are removing the decision making process and taking away the conflict and potential of doing things you regret. This is especially useful when alcohol is involved!
#9 Use cash to pay for everything. There is something about handing cash over that is painful in our brains. Doing transfers and paying on card just doesn’t set off the same sense of loss as handing over actual paper money. This is a simple way to be more aware of how much you are spending and being acutely aware of everything that you buy. You will start to question whether you really need to spend this money.
Combine this by withdrawing a set amount of cash at the start of the week, and then committing to not going back to the ATM until the next week. That way, you will manage your expenses to the amount of money you have left for the week.
We all do this anyway at the end of the month when payday is approaching and we have limited funds left. We measure what we have and adjust accordingly. Simply take control of this process, and do it all the time to use it to your advantage.
#10 Reward milestones. Saving isn’t sexy and often feels like we are foregoing things we want, even if that is not the reality. Therefore, it’s a good idea to reward yourself for adhering to a savings plan. Set a milestone, and when you achieve it, treat yourself to something. This will be satisfying and will serve as positive reinforcement to keep you going. You just built more motivation by buying something you wanted – perfect!
Saving money is not complicated, but it can definitely be hard. Use these tips to put the odds in your favor and to build up the habit of saving money. It gets easier the more you have been doing it, so get started as soon as you can!