Before you can start saving money each month, you need to have a clear picture of your cash flow. This means that you need to take into account all of your money flows in and out, including your potential debt repayments, your monthly bills, and how much you save each month. Let’s divide this process into several steps.
Learn to manage your budget and understand your finances
The most important thing to save money quickly is to learn how to manage your budget. If you control your budget, you control your finances. Becoming financially independent is essential if you want to achieve your short- and long-term savings goals. Here’s how to create a budget so you can start saving fast:
Track your finances over a 30-day period. This includes all of your income and expenses.
Compare your monthly income to your expenses to estimate how much you’re currently saving, or how much you’re overspending each month.
Classify your expenses into fixed and variable costs. Your fixed costs include expenses that are generally difficult to adjust, such as rent or utilities. Your variable costs include expenses such as groceries, entertainment, and subscriptions.
Identify any variable costs you can save on to increase the amount to save each month.
Evaluate your progress regularly and make adjustments if necessary. If you’re feeling a little overwhelmed, there are plenty of budget management apps available to help you keep an eye on your budget.
Pay off your debts
Before you start saving, you will need to pay off your debts. Because interest accumulates over time, the longer you wait to pay off a debt, the more it will increase. Pay off your debts first before focusing on your other savings goals.
For this, consider adopting the 50/30/20 rule. Created by US Senator Elizabeth Warren when she was a bankruptcy specialist at Harvard, the 50/30/20 rule is a simple way to manage your budget and therefore pay off your debts. It works as follows:
Use 50% of your income for your needs, ie fixed costs such as rent and utilities.
Use 30% of your income for cravings, which is variable costs like dining out and memberships.
Use 20% of your income for your savings. If you earn €2,500 a month after tax, that means you can save €500. In just one year, you will have paid off €6,000 in debt.
Open a dedicated savings account
In order to save money quickly, you will need to separate the money you use for your daily needs from the money you intend to save. For this, it is necessary to open a dedicated savings account. Thus, you minimize the risk of dipping into your savings funds to cover your daily expenses. This will encourage you to follow your daily budget while keeping your savings safe.
Schedule your savings
If you have a fixed monthly income, consider programming your savings each month: you can program an automatic permanent transfer from your current account to your savings account each month. Thus, you reduce the risk of using these funds to cover your daily expenses.
Schedule your bill payments
Note that you can also schedule the payment of your bills. Companies often charge late fees if you don’t pay them on time, so paying your bills before the deadline will help you avoid any additional charges.
Set your card spending limit
Want a great way to save money fast? Set a spending limit on your credit or debit cards. This will prevent you from overspending and encourage you to assess your daily purchases in advance. Many banks offer this service.
Use the envelope management system
Another possibility to help you save money quickly is to use the management system with envelopes from Dave Ramsey. This system consists of withdrawing your monthly income in cash from the bank at the beginning of each month and dividing it into different envelopes according to your management objectives.
Thus, you will have envelopes for your fixed costs (eg rent, utilities) and for your variable costs. By paying everything in cash, it is practically impossible not to respect your budget! But we grant you, it is probably not the most practical
Save on your rent
Saving on rent is one of the fastest ways to save some money each month. If you live alone, one of the easiest ways to do this is to share a roommate. This will immediately cut your rent in half, and if you choose to live with two roommates, you’ll pay around a third of your current rent.
So, if you are currently paying €1300 per month for a three-bedroom apartment and you find a roommate, you will save €650 per month.
If you already live in a shared apartment, you can move into a smaller room. Rents are generally calculated according to the room that is for rent. You can thus realize significant savings each month. In addition, it would encourage you to resell some of your furniture and allow you to earn some money.
Of course, the ways to reduce your rent depend on your household layout, your needs, and where you live…
Reduce your expenses
Another tip to save money fast is to reduce your expenses. Your electricity and gas bills represent the major part of your fixed costs. If you manage to reduce them, you will end up with a certain amount more each month. Here’s how:
Change energy supplier. By ensuring that you have taken out the most advantageous contract on the market, you could save several hundred euros each month.
Replace your light bulbs with LEDs. Not only do they consume 75% to 85% less energy than traditional light bulbs, but they last 15 to 25 times longer.
Invest in a smart thermostat. This will allow you to adjust your central heating intelligently and potentially save you some money.
Seal all air leaks. Air leaks around your windows and doors can increase electricity bills because your radiators will have to run longer to heat the room. Instead, plug these leaks with compressible thermal sealing strips to keep the warm air in.
If you own your home, consider carrying out energy renovations. There are many public aids to make your home a well-insulated cocoon that will reduce your carbon footprint.
Have an extra job
If you want to significantly increase your monthly savings, you can try finding an additional activity. It could be working a few nights at a bar or restaurant after work, finding a few freelance contracts, becoming a virtual assistant, or maybe babysitting.
If you can afford it, it can be very motivating to transfer all the income generated by these additional activities directly into your savings account. But it is advisable to be vigilant at the risk of burnout.