Effective money management involves not only earning more but also spending wisely. In this article, we’ll explore ten practical tips to help you reduce expenses and build a strong foundation for saving money.
Reducing expenses involves both positive and negative acts which one aligns to in order to minimize monetary output. When reduction of expenses is successfully achieved, then there would be room for saving funds. Most times the kind of expenses that comes around are unavoidable. At some point, you must attend to them without questioning your pocket. This article provides you with working proactive and intentional tips on successfully reducing expenses and saving money. Reducing expenses is a strategic act, however, saving money is a decision and is intentional.
How to Reduce Expenses and Save Money
1. Be disciplined in favour of “needs”: We all want a lot of things. It is firstly important to distinguish your wants from needs. This enables you go for the most important things. Your needs includes those things that are indispensable within the context. Needs can be also regarded as one’s immediate want. You can want almost everything, but you cannot need almost everything.
Therefore channeling your finance energy to spending on the most important things is a one point for you, as it aids in minimizing unwarranted expenses for you and allows you to save, if you wish to. Therefore it takes discipline to ignore wants and focus on your needs. Wants can be very attractive and enticing all the time.
Your ability to discern and ignore them at each point in a self-discipline. On the other hand, some wants are also very necessary. For instance, you may be wanting a car although you do not have an immediate need for it, maybe because you already have an alternative means of going to work. Such necessary is in fact s futuristic necessity. What differs it from your need is that there is absence of that immediate need. Therefore it is economically wise to also make savings for your necessary wants.
2. Target Savings Account: Just from the name, “Target Savings Account”. Good number of banks now operate on this policy. Target savings is a type of account which can be opened with a bank. Here you deposit money into the account of which you cannot withdraw until it gets to an amount predetermined by you.
For instance, you need to save $100,000 in order to purchase a targeted commodity. You can open a target savings account with any bank that operates the policy and then pay in money into the account at interval. Of course you already learnt that you cannot make withdrawals until it gets to that amount you predetermined on record.
Therefor in the instance given above, you can start withdrawing from the account once the money gets to $100,000. I know there are some rising questions. Questions like, what if in a case of urgent monetary emergency, you need these money which you have paid in but because of the policy, you are not eligible to make withdrawals because it hasn’t reached the predetermined figure?
The answer is this – you can as well walk into the bank, state these facts to them, sign the necessary documents for confirmation of identity and amendment of the agreement, then you would be allowed to withdraw your money. After all, it’s your money.
However, you most likely will not get the full money you paid in so far, because you will be charged a fee for wanting to withdraw it before due.
Of course this afore withdrawal policy is boisterous. To avoid the whole process, you can simply borrow money from a person. Assuming its remaining $30,000 to reach the predetermined $100,000, then borrow the $30,000 from a friend, pay it into the account and here, you are eligible to cash it out because it has reached the predetermined $100,000.
This policy of target savings pays you an interest as the policy keeps running.
Unarguably, you can acquire financial discipline, reduce expenses and save a lot of money if you consider this target savings bank policy and remain disciplined to paying in tokens into it at intervals.
Asides the target savings account, you can make a target savings in your home or by any other less formal way.
3. Use a Fixed Deposit Account: Do you, from your mobile banking app, make transactions from here to there without remorse? See how fixed deposit helps you to save money and reduce expenses. You can fix some certain amount in your bank account. By this, you are asking the bank to hold the money in trust for you, to pay you back at a predetermined date.
How does this work? Once an amount is fixed, the money is debited from your account. Then on the very first hour of the fixed date, the money hits back to your account as a credit alert with an additional interest. Amazing right? You may want to try it out and see how much it saves for you. Most times there is a particular threshold which you cannot fix less than. Some banks place their threshold at $100, 000. So if you want to fix less than $100,000 then you should consider a fixed savings.
You can fix an amount from seven days upwards, up to years. Now let’s illustrate this – you have $120,000 in your account for instance, you then fixed $100,000 for 1 month, the money in your account now remaining $20, 000. You’ll agree with me that having $20,000 remaining in your account gives you a sense of economic discipline. You are forced to spend wisely until your next pay or until your fixed 1 month expires and drops back with an addendum interest.
4. Budget Spending: Try to map out a weekly, monthly or periodic budget, having utmost regard to your level of income. Having a budget is another level of financial discipline on its own. This regulates your spending and restricts you to the most important things, since budgets is to be mapped out considering scale of preference.
5. Shop with a List: There are so many attractive and enticing commodities out there. You don’t want to see them because when you do, you would always wish to have them all. Asides this, whatever it is you intend to buy from the mall or market is actually not the only thing you need.
Therefore you need a list. Map out the list of what you intend to buy, otherwise you may find yourself forgetting them or getting tempted to buy another. Mapping out a list restricts you to buying the most important things which you have afore considered. The rule is this – ignore anything not found on your list, except on exceptional instance where another need was misplaced or has arisen.
6. Purchase in Bulk: Purchasing commodities in bulk saves a lot of cost. If there is a commodity you are always needing, there is no point purchasing them in turns or in pieces. Try getting them by stock. Remember the principle of Economics – the higher the quantity the lower the price.
7. Cook at Home: It is more economical when you cook at home. Having a 3 square meal at eateries certainly costs you more. Consequently, if you cook by yourself, you are likely to stay healthier and you will be able to save more money. Trust me, it works like magic.
8. Maintain a healthy diet: It may cost to maintain a healthy diet, but certainly it costs more to get an ailment. Getting sick costs a lot of your time, reduces your productivity and of course cost you more money. As a person seeking financial balance, one of the best things for yourself is to stay healthy.
You certainly do not want to spend more time and money in the hospital and on medications. Maintaining a healthy diet is a neglected money saving and expense reduction technique.
10. Invest: Now that you have successfully reduced your rate of expenses, then focus on investing the money you have saved. There are so many things you can invest your money and get back huge returns. Take for example, agriculture, transportation, skill etc. Trust me, if you do this, you will be surprised at your own financial stability in the next 2 – 3 years time from today.