Firstly, set up a household budget and decide your time period eg for the next year ahead. Divide your budget into 3 main categories: fixed, variable and discretionary expenses.
Fixed costs are those costs you can’t avoid. For example, mortgage costs, household costs like your payment of your utilities and rates, if you own your home. Variable costs are those costs which you still need to incur but that vary month to month.. Discretionary costs are non essential costs for entertainment, dining out, etc.
Follow these easy steps to learn how to save money on a budget:
- Estimate how much you currently spend in each of the other above categories for each month.
- Decide how much money you would like to save in the next year.
- Earmark categories where you think you can make savings.
Once you have decided on a figure. Say I will save $5,000 extra in the next year.
Each month, monitor your progress with saving. Jot down the following:
- For example, ate out twice a week rather than 5 times a week. Estimated saving from this item on the budget is X dollars.
- Watched a video rather than went to the cinemas once a month. Estimated saving from this item on the budget is X dollars.
- Bought drinks and had friends around rather than went to the pub. Estimated saving from this item on the budget is X dollars.
After 3 months, if you are pleased with your progress, continue monitoring your savings in the same fashion. If you are not saving as much as you would like to, review each of your categories where you thought you would make savings, and see which categories are letting you down.
Maybe the savings you have identified are not realistic for that category. You may need to revise your goals, ie. Revise downwards the amount you wanted to save or choose a different category where you want to make savings.
Once you get into the habit of saving money, it will get easier.
Remember to stick to your goals.
Remember that the money you save will also earn you extra interest.
So you will have more money available to set aside for a rainy day or for whatever special purchase you are saving money for.
Other Save Money Hound articles
Does saving money cramp your lifestyle
