A new year has started and this has given many a fresh start, especially when it comes to saving money. Whether it is because financial analysts argue that we may be on the brink of a large-scale economic recession, or because you expect to have large expenses in the future, the best time to start saving money is at the beginning of the year.
This is mainly because it will give you a better idea of how much money you can save in one year, but also because it makes planning your expenses easier. This having been said, what are the most efficient ways to save money in 2021? While finding the best ways to do this will depend on your lifestyle, on how much you are willing to sacrifice your creature comforts, and on your income level, there are a few methods that everyone can use:
Budget Your Income
The first thing that everyone should do, provided that they have a stable source of income, is to create a monthly budget. Simply write a list of vital expenses (such as utility bills, rent, recurring medical bills, etc.) and one for creature comforts and occasional expenses.
Look at the first one and establish if anything can be moved to the optional expenses list. Once only the vital items remain, add them together and determine how much money you will have to spend each month.
Next, look at your list of creature comforts and optional expenses. This one should be filled with things such as Netflix subscriptions, money that you spend when going out, etc. The key here is to reduce the number of items on this list as much as possible. In the end, the less you spend, the more money you will have to save or direct to more important expenses.
Open a Savings Account
Opening a savings account is often the best way to ensure that you will save money effectively. First of all, it gives you a safe place to store everything you save and the compound interest that the bank will give you should be a great incentive to not withdraw any of it. Secondly, it makes your money work for you. Over time, especially if you make fixed monthly contributions, the account will grow up to the point where it may be possible to treat the compound interest that you get as a secondary source of income. However, a lot of discipline is required to reach this point.
Set Up Automatic Payments and Deposits
If you are worried about forgetting to deposit money into your savings account or are likely to spend the money on other things, consider setting up automatic deposits. Most banks will allow you to set up automatic payments to your savings account, ensuring that you never miss a deposit. Furthermore, setting up the transaction on the same day when you get your salary will ensure that you don’t allow yourself to spend the money.
Look For Discounts, Resell Only Devices, and Find a Passive Source of Income
There is no limit to how much money one can contribute to one’s savings account, or how often. If you would like to give your compound interest rate a boost, then consider making a couple of very large deposits during the first 5-6 months. If your monthly budget is already stretched to the breaking point, you should be able to get additional funds by selling old devices that you no longer use. Alternatively, you could focus on only purchasing discounted products (for a couple of months), or find a passive source of income.