A complete guide on how to save your money strategically with a budget planner, saving myths, and tips on how to save money more effectively.
Money can be scary. Many of us grew up with no financial strategy, no idea what to do with our money, how to save it, or how much we should even save. We were just told to save, save, save!
Numbers don’t lie. The majority of people don’t know how to save money the right way.
The Current State of Saving
If you want to have healthy finances, then you need to have a strong savings plan to protect you from going into debt when emergencies arise.
This guide will cover:
- The biggest myths about saving money
- Bad money habits that eat your money
- Why you need to save some money
- Savings 101 – how to save your first $2,000
- When you should stop saving your money
- What to do after you’ve saved enough money
Let’s start by talking about some of the biggest myths around saving money.
The biggest myths you’ve been told about saving money
What you’ve heard about savings is probably wrong. In this section, we’ll go over the myths so we can get to the truth.
You will learn:
- How past generations saved money
- Why buying things on sale does not save you money
- 0% APR and no money down is a trap
Saving Myth #1: You need to save for the sake of saving
Let’s talk about money, and what people used to think about it. And what better place to start than your parents.
No, don’t run away yet!
We’ve all heard it before, “Save your money! Only buy what you need!”
Everyone has always told you to save as much as you possibly can for as long as you can, so that must be what you’re supposed to do, right?
Let’s think about that concept for a second. Save, save, save until, what?
What are you saving for?
Don’t you want to use your hard earned money while you’re still alive?
Now, read this next line closely.
We want you to use your money to live a better life, not die on a pile of money.
So, then why do your parents stuff their money into a mattress?
Because they don’t understand money.
Saving is losing. When you save your money, your savings will slowly lose value due to inflation. However, that doesn’t mean you shouldn’t save any money.
It means you need to save strategically.
Your savings aren’t there to make you wealthy. Your savings are there to protect you from going into debt when an emergency happens.
Plus, you should save money to:
- Buy a big purchase
- Buy an investment
Saving Myth #2: You save money with sales
Let’s set the scene:
You’re at the store, and you spot a really nice sale on blue jeans. You need blue jeans so you walk on over and check out the sale.
“BOGO – Buy one get one half off. Get one pair of jeans for $40 and get two for $60.”
But you have to buy two pairs to get the deal.
“What a deal!” You exclaim, as you go to buy your pairs.
You only needed one pair, but they normally cost $40 a pair usually so what a deal, right? Why would you just get one when you could essentially buy one, and get the second one for 50% off? Can’t miss that deal!
Think of the money you’ll save by buying two.
This is the part where we might start hurting your feelings. Buying things on sale does not save you money.
You might be thinking, “I’m getting so much more for so much less!” And you’re kinda right, but you are still spending more than you needed to.
Let’s break down the above scenario.
A pair of jeans costs $40.
You bought two pairs for $60.
This means that you did not save $20 you spent $60.
The first step to building wealth is controlling your spending. Once you master how to live below your means, you can work on expanding your means.
But you can’t do that until you are disciplined with your money.
Saving Myth #3: Buying things with 0% APR is a great way to save money
You are looking for a new fridge.
A salesman approaches you and says:
“Hey, I know that price tag looks high, and maybe you can’t afford it right now, but you don’t have to pay for it today or even tomorrow! In fact, you can finance this fridge with $0 down and 0% APR if you pay it off within the next 16 months!”
Looks like you’re going home with a brand new fridge! And hey, you didn’t even spend anything today!
How could this be bad?
You might want to close your wallet for this one.
You just bought a fridge that you can’t afford.
And, since you didn’t have the money to afford the fridge, you just put your financial future in jeopardy.
All because of a fridge.
It’s a salesman’s job to sell you things. It’s a mortgage broker’s job to sell you a mortgage. It’s their job to make deals look attractive so that they can get paid.
They don’t care if you can’t make your payments later. They only care about the sale. That’s why you need to know how much you can spend on something before you buy.
Habits That Eat Your Money
It takes 21 days to break a habit and 90 days to build a lifestyle. Let’s spend the next 90 days building a healthy financial lifestyle.
In this section we will go over:
- Your money spending habits
- Why you need to save some money
Money Habit #1: What’s holding you back?
Having a strong financial base is like building a castle. You need to start by laying a strong foundation.
If you want to build a strong financial base, you need to do three things immediately:
- Save a minimum of $2,000
- Have $0 of credit card debt
- Put aside $500 for investing
If you haven’t created your financial base and established these three things, you need to cut your expenses because you are at financial risk. Here’s how to stop spending money so you can start saving money:
- Chill with the Netflix: If you don’t have $2,000 in your savings account, then you need to cancel these services until you do. This is a small drain of your wallet but a big drain of your time.
- Credit and financing: You need to put a stop to buying things you can’t afford. Here’s a hint: if you have to finance it, you shouldn’t go home with it.
- Date night: Until you have that financial base, call up your friends and tell them you can’t go out this weekend. Next weekend too.
- Name brand: If you haven’t built your financial base, stick to the products that are less expensive. And do yourself a favor, don’t shop hungry.
- Toss-up: Don’t gamble or bet your money on anything, ever. It’s a risky play that will leave you with less than you put in.
You don’t have to stop watching Netflix forever, but you do need to cut back until you have created your financial base.
Money Habit #2: Living a life you can’t afford
Just because you have the money to buy a brand new car doesn’t mean that you should.
And that definitely doesn’t mean you can afford it.
Make a rule that you aren’t allowed to spend more than $0.75 of every dollar you make. The rest of your income needs to be saved or invested.
This will help you live a life you can afford. If you want to live a bigger lifestyle, you need to earn more money.
Everyone has things they want, and everyone has things that they need.
In this section, you’re going to learn:
- Reasons why people save
- What saving will do for you
Saving: Why we do it
Here’s a list of things you might be saving for:
- Grad school
- A new house
- An investment property
- A fancy car
- And of course, emergencies
Saving is being prepared.
We want you to be prepared when you have a financial emergency in your life, not scramble for cash and put yourself in financial risk.
Things happen. Life happens, and you can’t prevent every bad thing from happening to you. Being prepared now will make a difference later on.
Saving 101- How to save your first $2,000
Still with us? Great!
You’re ready to start saving your cash! But how do you do it? How do you actually take your paychecks and transform them into that first $2,000 in your savings?
In this section, we’re going to go over:
- Key saving tips to save your first $2,000
- How much money you should be saving
Here’s some tips on how to save your first 2,000:
- Budget: Every month, write down all of your expenses. Common expenses include your mortgage, car, student loans, and eating out. You need to know how much money came into your bank account and where the money went. This is called a budget planner.
- Reduce your bills: Bills are not going away. But, you may be able to reduce your payments. How? Call up your service providers and negotiate a lower price.
How much should you save?
- Changed your habits,
- Learned what you can afford to save
- Budgeted your money
- Reduced your bills
You’re probably asking yourself, “how much money should I save?”
First, you just need to establish your financial base.
Saving $2,000 is enough to get yourself out of financial danger, but it’s just the first step. And make sure that put the money into a savings account at your bank or credit union. What is a savings account?
The next step is to save 6-months worth of expenses. Yes, there’s a limit to how much you should save. In the next section, we’ll explain why.
Saving is Losing
Now that you can breathe easy because you have a strong financial base, it’s time to double down.
If you haven’t already, it’s okay to re-watch The Office again, and yes, you can now afford a few drinks at the bar with your friends.
Here’s what we still need to talk about:
- What your savings goals should be
- How inflation makes the majority of people poor
Buff up your base
The first $2,000 was a band aid fix; a temporary buffer that sits between you and a disaster.
But now, you’re going to need something stronger to cover you and your family forever. Every time you get paid, you want to save 10% – 20% of your income.
Once you have six months of expenses saved, that’s it, you’re done. You don’t have to save any more money
And actually, you shouldn’t save any more.
Inflation: the basics, and why the majority of people are becoming poorer
Remember that inflation thing that we mentioned a little while ago?
Well, I hate to break it to ya, but just because your money is in a savings account does not mean that it is safe from inflation.
What this means is that each and every year, your money is decreasing in value.
To keep it simple: $100 today will not have the same buying power as $100 in 10 years.
It’s the same reason why your grandfather could buy a gallon of milk for a nickle when he was a child. The value of your money is going down a little bit each and every day.
In other words, as time goes on, you need more money to make your regular purchases. Your savings are not growing fast enough to keep up with inflation.
We want you to be financially responsible, yes, but we also want you to use your money before you’re old and gray.
Saving too much means that your wealth is slowly being eaten away by inflation, which means that you are becoming poorer.
What Comes Next?
Congratulations! You are now a savings master! Let’s recap everything that we went over in this guide.
- The top myths about saving
- Bad money habits that eat your money
- Why you need to save in the first place
- Savings 101 – How to save your first $2,000
- Why you can’t save forever
Your parents were right about one thing: Saving is important and you need to do it.
But, with new generations comes new ways of doing things. There’s a lot of misinformation out there but there’s one thing to remember through all of this:
Being financially literate is important, and it pays to know your money.
So, now what? If you’re not saving your money and you’re not spending your money, what exactly do you do with it?
Ah, we like that you’re still hungry for more!
Now it’s time to grow your money so your money can grow faster than inflation and so you can begin to live the life that you’ve always dreamed about!
You want to use your money to buy investments which are things that pay you to own them.
Ready to learn how to do it?
You can read our free eBook on money management and investing – plus you’ll get our financial education emails as well.