According to CNBC, 57% of Americans have less than $1,000 in savings. At the same time, many people consider budgeting and saving money impossible.
High outgoings compounded by low monthly incomes, make saving money challenging. However, finding ways to save money when still young, is more important than ever.
Why You need to Become a Money Saving Expert
During their day, baby boomers were able to comfortably save up to 12% of their annual net salary. Today, younger generations struggle to save just 3%. Young people are, therefore, likely to suffer a significantly reduced standard of living as they approach retirement.
Is Saving Money Still Possible?
Some argue that young people today lack the discipline required to save money. Others say that stagnant incomes and high rents make traditional money saving strategies ineffective. However, the reality on the ground is more complicated.
- 5-year high-interest saving accounts see savers benefit from just 0.86% interest at the end of saving terms. (As opposed to 11% – 12% per year in the 1970’s and 80’s)
- Millennials are often smartphone rich but cash poor due to easy access to store credit and financing
- Rents and house prices are constantly on the increase, whereas average hourly rates of pay are comparable to what they were in the 1970’s
Ways to Save Money by Living More Frugally
The easiest way to start saving money today is to start living more frugally. At present, up to 5% of the average European monthly salary is eaten up by online subscriptions.
Netflix, Spotify, and other media streaming services charge up to $13.99 for monthly access. Conversely, consumer data shows that average Netflix users spend just 1 hour and 33 minutes per day streaming content. More bizarrely, users of streaming services like Netflix, often still pay monthly subscriptions for regular cable and satellite television access.
Budgeting & Saving Money Responsibly
Users of subscription services like Netflix can start saving money by paying only for those which they use. In most cases, simply ditching lesser used apps like Spotify will result in instant savings of $100 to $200 per annum. However, overspending with regard to on-demand streaming services is part of a much broader ‘instant gratification’ problem.
- Prices for must-have consumer tech goods have skyrocketed in recent years
- The latest iPhone models cost more than the sum total of most Americans life savings
- Financing companies meet consumer demand for products by presenting consumers with a myriad of monthly payment options
The Consumer Goods Asset Depreciation Problem
For the most part, it isn’t practical for consumers to go off-grid to save a few dollars each month. However, must-have consumer goods like the latest iPhone will often depreciate rapidly in value. Smartphones bought today for $1,000, will usually be available a year from now on eBay for just $500. When, therefore, consumers pay on credit for such items, they lock themselves into an effective savings death spiral.
High interest on financing means that consumers should always weigh the worth of new products against their real-world cost. Do you need the latest iPhone? Or is your want for a new device based on a simple need for instant gratification?
How to Save Money by Allocating Yourself an Allowance
To make budgeting and saving money easy, savers would be wise to get into the habit of allocating themselves a fixed monthly allowance.
To make things simple, savers should take their monthly paycheck and calculate all their fixed monthly outgoings. (Rent and utilities etc.) Once this is done one of the easiest money saving tricks to employ is to then allocate a fixed sum of what remains for personal use.
- Personal use should include groceries, toiletries, and non-essential expenses like gym memberships
- When savers identify a new gadget or impulse purchase which they can’t live without, they should only make that purchase at the end of the month with whatever remains from their allowance
- Any allowance savings at the end of a month can either be saved or rolled over to pay for new luxury items and non-essentials
Use Free Budgeting Apps
To become a defacto money saving expert, it is imperative that savers identify their real monthly incomings and outgoings.
Many young Americans and Europeans use on the fly budgeting to manage their finances. Instead of allocating ready cash for credit card and utility bills, consumers wait for physical payment notices and app notifications. This leads to overspending and the rise in popularity of ‘just to make ends meet’ payday loan companies.
Become a Money Saving Expert with Mint
Mint is a free personal finance app available on Android and iOS devices. Often cited as the ‘Beyonce’ of personal budgeting, Mint makes it easy for even busy millennials to track their real-time income and outgoings.
- Mint links to bank accounts and records users real-time spending behavior
- Mint allows users to track live checking, savings, and retirement account data
- Mint allows users to monitor their consumer spending behavior and notifies users of impending cash flow problems
By using apps like Mint, savers can identify what they spend each month on personal grooming, entertainment, food and drink, and servicing of credit. More importantly, Mint users can see how their spending activity today may be adversely affecting their long-term financial prosperity.
Save Money By Tackling Debt Problems
At present, 42% of households in the United States are saddled with credit card debt averaging $5,000 to $10,000. At the same time, a quarter of all young people in Europe are believed to be in constant debt. When looking at how to save money, savers should, therefore, consider clearing debt as their number one priority.
- Wherever possible, savers should consolidate personal loans and credit card balances
- If possible, people in debt should attempt to negotiate repayment plans with creditors
- Where people are still in good standing, existing credit card debt should be moved to credit cards with fixed rates or (even better) promotional 0% interest rates on transferred balances
Debt is frustrating to savers as debt never disappears. Instead, debt often grows because of interest, even after people have managed to organize their finances better. This being the case, anyone in debt should attempt to eliminate debt and reduce the pinch on their pocket by seeking out more preferential interest rates.
Save More By Earning More
One of the most effective money saving tricks for savers can be to simply earn more.
Traditionally, people increase their income via promotion and seeking out new job opportunities. Sadly, more and more jobs are becoming automated. This leads to fewer advancement opportunities, especially in industries such as retail and manufacturing.
Could it be Time for a Career Change?
As a rule, if after three years working for the same employer, your position or salary hasn’t changed, it is probably time to start looking for a new opportunity. Of course, this doesn’t mean quitting on the spot.
- If you are happy working with your employer, schedule an appointment with HR to discuss the possibility of advancing within the company. (Or retraining to take on a more challenging role)
- If advancement isn’t possible, consider investing in expanding your existing qualifications and skill base
- When applying for new employment opportunities, make sure to polish your CV and follow up submissions with direct inquiries made via email and telephone
Increase Your Earnings by Creating a Side Hustle
Depending on your circumstances, it may not be possible to move up the career ladder in the conventional sense. However, monthly incomes can be subsidized by anyone, simply by setting up a part-time side hustle.
From babysitting to online freelance work, the world freelance economy is booming. When setting up a side hustle, though, remember not to become reliant on extra income. Where extra money can be earned, this should be earned to save, not used to pay for everyday essentials.
Why You Need to Save
Not saving money today will be catastrophic for your long-term financial prosperity. Rising costs of living mean that state pensions will rarely be enough to allow young people today to retire comfortably. Worse, not having savings to cover periods of unemployment, is the number one driving force behind increasing rates of homelessness.
66% of Millennials Aren’t Saving for Retirement
According to CNN, 66% of millennials don’t have anything saved for retirement. When the bank of mom and dad runs dry, those young people are, therefore destined for a bleak financial future.
Thankfully, millennials still have 20 – 30 years of earning potential to turn things around. All that savers need to start doing is exercising better personal discipline and start planning more proactively for the future.
Is your financial future in safe hands? If not, make sure to follow us for practical saving tips and advice which really can make a difference.