Saving money is hard. We know, because we've done it. Over the course of 2 years, we saved enough money to live our dream of travelling around the world. We are certainly not rich, but we actively made the choices it takes in order to make this the number 1 priority in our lives and adjusted ALL our spending to ensure we could hit our goal.
As we learned, to successfully save more money you must do 3 things:
- Set a goal - Identify the reason for saving. Whether that is to pay off your debts, buy a home, or travel around the world, having a reason for saving will put a "face" on your savings. When you save for some nebulous future it is easy to forgo putting money towards your dream.
- Make a budget - this step is very simple in concept but so many of us shy away from doing the work. We perceive it as being hard or we simply do not want to face whatever reality the figures may reveal. Perhaps, like us, you find it impossible to believe that you could spend THAT much money on food in a month. Regardless of your hang-ups, knowing where your money is going and where you need it to go are critical to saving the money you want.
- Take action - This is where the hard part comes in. Far too many good intentions get lost somewhere in the void between Steps #2 and #3. We all have great intentions to do better, and then somewhere along the way we wander into a home decor shop and the budget goes all to hell. Well, it is in this void that you can separate yourself from the vast majority of people. Taking action is hard, but it is so important.
One of the keys to taking action is to identify where you can cut expenses. Most of us identify the top 3-4 areas where we can save the most money and then assume the process is over. Not so. This is just the beginning of putting yourself on the road to being debt free or one step closer to your dream life. To really save money, you need to identify how you can care for ALL of your money.
Do you know exactly what you spent last month on food? What about entertainment? Are you spending 3 quid every day for a coffee? These small expenses can quickly eat up a lot of your savings, even though it seems so small each day. We all have the ability to justify these expenses, ("it's just a coffee and I work hard and deserve to reward myself"). Yes, I'm sure you do work hard and you certainly deserve it. The issue here is that your small outflow of cash each day is resulting in a large amount of lost savings each month.
Cutting a little each day can add up to big savings in a year. Spending £2 on coffee every day adds up to £730. Or, in terms of our trip around the world, this equals 1 week seeing the world. Do the math and understand what each of your expenses means per week/month/year. A little saving each day can really add up to big savings at the end of the year and you will be much closer to a debt free life or living your dream life.
What 3 expenses could you cut out that would put you closer to your savings goal?
About the Author: Warren escaped an 18-year career in the software industry to follow his dream of travelling around the world. He and his wife left in October 2010 and have witnessed the power of a volcanic eruption in Ecuador, been awestruck by the beauty of Antarctica, and are currently indulging in the cuisine of Thailand. Their first book, Dream Save Do, documents the step-by-step process for how they amassed the cash to live this dream life. You can also follow along with their adventures at Married with Luggage.