By Nancy Mann Jackson Bankrate.com
WWR Article Summary (tl;dr) From "paying yourself first" to "saving with a purpose", there are plenty of ways you can get on the road to financial freedom.
Saving money on a tight budget is not only possible, it's also imperative.
One unexpected expense can have a huge impact when money is tight. Finding a way to start saving money so that unexpected expenses aren't so devastating may not be easy.
But shifting your thought patterns can yield long-term results. Being a "saver" as opposed to a "spender" may not be natural to most people, but it can be developed through practice.
Here are eight ways to save money when money is tight:
-Make it automatic: You can't spend what you don't see. Bankrate chief financial analyst Greg McBride recommends that people get started by automatically setting money aside each payday.
"Set up a direct deposit from your paycheck into a dedicated savings account and build your budget based on what's left," McBride said. "If you're not current saving 10 percent of your income, that's the bogey to aim for when you're setting up that direct deposit."
Many employers can split your paycheck deposit into a checking account and a savings account. Or if you're self-employed, schedule automatic transfers from your main checking account to your purpose-based savings accounts on a recurring basis.
–– Create a budget: Setting a budget is the best way to become a disciplined saver. To get started, review your bank statements, pay stubs and other financial documents to get an idea of where your money is coming from and going.
One budgeting option is to calculate your fixed expenses, and then look at your other needs, like food, gas, clothing and entertainment. Determine a number for weekly expenses and challenge yourself to stay within that amount.
Set a specific amount, such as $100 a week, and take that out of the bank in cash at the beginning of the week. Use that money for the week and try not to allow yourself to dip into other funds. Then, try to go down to $90 or $80 per week to see what you really need.
Once you've grown accustomed to living on your budget, you'll free more money for saving toward various goals.
–– Pay yourself first: If your strategy is to wait until everything else is paid and save whatever is left over, reconsider your process. Consider putting most of your paycheck into your savings account and making a recurring weekly transfer to cover necessary expenses. Then decide whether any excess money should remain in the account to cover any upcoming expenses or be dedicated as extra savings.
–– Save with purpose: It may be difficult to put money back simply for general savings, so it's important to have a clear reason for your savings. The purpose may be to have an emergency fund, a vacation fund or something else, but knowing the reason you're saving will make it easier to avoid spending the money on something else. "The most important thing is to get in the habit of saving," McBride said. "Successful saving is all about the habit. Once you establish the habit then it becomes a lot easier to parse out money for different objectives."
–– Shop smarter: Stop buying things without shopping around for the best price. Make a commitment to comparison-shop for essentials and look for coupons and sales online or in your local newspaper. Then, buy the items with the best value.
Don't stop there. Take the difference of the amount you paid and the amount you would normally spend on the item and put that money into a savings account. Even if it's just a few dollars per shopping trip, those small sums will add up.
–– Keep the change: It seems old-fashioned, but take the loose change out of your pocket, your purse or your car tray, and save it in a jar. Look for ways to add more money to your jar. For example, every time you withdraw cash from the ATM, put 10 percent of what you withdraw into your cookie jar savings. Every month or quarter count the money you've accumulated in your jar and add it to your savings account.
–– Re-evaluate using credit cards: Buying what you cannot afford on credit is a surefire way to accumulate debt and incur interest charges. Financial advisers recommend taking scissors to plastic if you're prone to misusing credit.
Rather than using a credit card to pay living expenses that are beyond your income, focus on getting rid of credit card debt and switch to paying in cash or using a debit card. If your extra cash each month is spent on making credit card payments, you'll never be able to save and get closer to your financial goals.
But credit cards aren't always your budget's foe.
"Used appropriately, credit cards can help you save," McBride said." For a disciplined consumer who pays the balance in full every month, a rewards credit card could generate cash back that helps pad your savings account."
–– Stay committed: Many experts recommend that you save 20 percent of your earnings each year, but that's not easy to do.
Often when people commit to an ambitious savings level, something happens in the first few months that will discourage saving _ for example, a child needs braces or the roof needs repairs.
But if you deal with the major expense and continue the savings track, you're more prepared to deal with more expenses that may arise.
After a year of forcing yourself to save and receiving the self-esteem that comes with it, most people will be committed to the lifestyle of saving and often will find ways to save even more.
"You can transform from a spender into a saver, but it means prioritizing saving first," McBride said. "Hold yourself accountable. Track your monthly spending against your monthly net income. At the end of month, tally up how much you brought home and how much you spent during the month and if there's a surplus, push that money into savings."