This was originally published on Monday, January 9, 2017, in the Pacific Daily News. Click here to subscribe to the PDN.
Q: I want to start saving more in 2017, but I always find myself barely making it to the next payday. Living payday to payday is difficult and saving money on a tight budget seems almost impossible. Do you have any tips that you can share to help me find money to start saving?
I commend you for wanting to start saving. You are not alone. Many people find it hard to save money, especially with the cost of living. I’m not going to sugarcoat it — saving may mean having to give up certain luxuries and reprogramming the way you think about spending money.
If you stick to it, you will find that once you get going and see your progress, you will continue to save and eventually it will become automatic and not so tedious. Some of the tips I have may not fit your lifestyle. Pick the tips that best suit you. If it doesn’t work, try something else. The important thing is to keep saving a little at a time.
- Record your spending. Most people think they know exactly where their money goes. The truth is you will be surprised to learn how much you spend on nonessential items. Save the receipts of all your purchases and expenses. At the end of the month, make two categories: essential and nonessential. In the essential category, include your rent/mortgage, insurance, groceries, loan/debt payments, fuel and any other payments you must make. Under the nonessential category, include your impulse and entertainment expenses such as coffee, eating out, game or music downloads, cigarettes and other items you don’t necessarily need to survive.
- Credit cards. Credit cards are a great way to build credit, but using credit cards to pay daily expenses can really be draining your savings potential. Most credit cards have high interest rates. Unless you pay your card off at the end of the month, you will be paying hundreds of dollars on a cup of coffee by the year’s end. Use your credit card sparingly and you can save hundreds, even thousands, of dollars.
- Tax time. Be sure that you are getting all the exemptions for which you are eligible. It may cost a little, but see a financial adviser or tax preparer. You may be eligible for some tax breaks that you didn’t know existed. Use the tax savings to pay down some debt or put it in a savings account.
- Compare prices. Many people overlook this tip because it does take a bit of time to do your research. Before going grocery shopping, compare store circulars and sales. A little research can save you a few hundred dollars a month. Compare prices for expensive items as well. Home and auto insurance is another expense for which you can compare prices and save.
- Earn extra money. You don’t have to get another job, but you can use your free time to earn money. Ask your family, friends, or neighbors if they have any jobs around the house that they need done. Baby-sitting, car washing, house painting, yard work, house cleaning and other jobs can bring some additional cash. Put some of the extra money earned in a savings account and use some of it to pay off debt.
- Think before you spend. It is nice to treat yourself every now and then, but evaluate before purchasing. If you want to purchase a $60 dress and you make $10 an hour, is that dress really worth six hours of work? Sometimes reminding yourself of just how much you work to earn your income can put how you spend your money into perspective.
- Use cash only. It’s hard to know what you are spending when you use your debit or credit card. If you use cash, you can literally see the cash depleting from your wallet. This can help you break the cycle of overspending.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.