Updated: July 16, 2020
To save money is important and everyone wants to do it, but wanting is different from actually doing.
While some find it easy, most individuals continue to struggle with saving money and don’t know where and how to begin.
Sometimes, to avoid the stress of following a budget, people forego the act of saving money. And it’s often too late when they realize that it’s an essential skill to learn if they want to avoid going into debt, which is certainly more stressful.
Moreover, people who continue to live from paycheck to paycheck will miss the opportunity to invest for their future, and consequently, retire comfortably.
However, what if your income is just enough for your regular expenses? Paying yourself first will certainly become difficult to apply.
To solve this problem, we need to remember that there are two ways to create surplus in your cashflow. First is to lower your expenses, and the second is to increase your income.
The first method — to lower your spending — is easier to do, and that’s what we’ll focus on today. Specifically, how to find money to save from your expenses.
Step 1: Track your expenses
The first step for this method is of course, tracking your expenses. This may seem tedious at first, but once you do it often enough, it will become an effortless habit.
What I do is use the Notes app on my phone to jot down all my spending that has no O.R. or receipt — the tip I gave the gas attendant, the snacks I bought at the sari-sari store, the fee that I paid to my cleaning lady, etc.
For all other purchases, I simply ask for and then keep the receipt. At the end of the day, I input everything in an Excel file. Try not to skip a night, but if you did then just do it immediately the next evening.
Step 2: Gather your bills
The next step is to gather all your bills; particularly your utility bills and credit card statements. These are often your largest expenses so it’s important to know where the good portion of your money is going.
Moreover, a lot of your automatic expenses occur here, and we need to know what they are.
What are automatic expenses? These are monthly costs, which you barely notice and often forget you’re paying them. A good example would be add-on services in your utilities.
Step 3: Categorize your wallet spending
After a couple of months of diligently doing the first two tasks, go back to your Excel spreadsheet and identify which among your expenses were avoidable and frivolous.
For example, a few times during the month, you took a taxi going to work because you woke up late and won’t make it on time to the office if you take a bus. This was an avoidable expense.
And then, that shirt you bought simply because it was on sale. Since you didn’t really need a new shirt — that’s a frivolous expense.
Being self-aware is the first step to taking control of your unnecessary expenses. Keep these particular incidents in mind and you’ll be better at avoiding them next time, especially that you now know how much they can add up.
Step 4: Analyze your automatic expenses
Lastly, go through your bills and statements and identify your regular expenses, particularly those automatic costs. Ask yourself, which among them can you eliminate or reduce?
Cable TV subscription, internet connection, gym memberships, magazine subscriptions — look carefully and you’ll see that there’s a lot of them “hiding” inside your paper bills.
A friend was paying more than P500 per month for a premium Cable TV plan. When he realized that he only ever watches several channels that’s available in the basic package, he immediately downgraded his plan to save P200 per month.
Another friend’s been paying Caller ID service in his telephone subscription — something that he doesn’t really need, he had that removed as well, saving him a few extra pesos per month.
Funnel The Cashflow to Your Savings
When you become mindful of your wallet spending and eliminate or reduce the costs in your bills, you’ll start to create surplus in your cashflow, which you should then funnel towards your savings.
It doesn’t matter if what you get to save is just a meager amount, because as months go by and your savings start to grow — you’ll become more motivated to continue this good financial habit.
It’s normal to feel burdened by the tasks at the start, but believe me when I say that it eventually becomes easier and automatic.
Save now, and someday — your savings will save you.