5 Easy Ways to Save Money Each Month
Here are five great ways to save money each month.
You may not be making six figures—but these five tips will help save money—even on a low income!
1. Reduce Your Housing Costs
Your rent/mortgage payments will typically take a large chunk out of your budget. And reducing these costs will enable you to significantly increase your savings rate.
There is a common rule for debt called the 28/36 rule, which is used to help you regulate your spending and manage your debt.
The rule 28/36 rule states that your household should not spend more than 28% of its gross monthly income on housing expenses—and a maximum of 36% on total debt. Which includes things like housing and a car loan.
It might be a good idea to look for ways to reduce your payments—if you're more spending more on your housing arrangements than the 28/36 rule permits.
Reducing your housing costs is one of the best ways to free up cash and save money on a low income.
2. Save Money on Your Car
Many people effortlessly overspend on their car—whether that means buying or leasing the latest model, or simply driving a car that they cannot afford.
The car in the picture below is a good example of overspending—for most of us!
Buying used cars instead of the current model you have your eye on is a great way to cut expenses—especially on a low income. By purchasing a three-year-old car you are essentially evading the massive depreciation that new cars experience.
According to carfax.com “the value of a new vehicle can drop by more than 20 percent after the first 12 months of ownership.”
You can then expect your car to lose another 10 percent in resale value each year for four years after that. Essentially, your car can be worth as little as 40 percent of its original purchase price after five years.
You will typically pay for the depreciation on your car whether you buy it or lease it. Therefore, the best way to avoid this heavy expense all together is to buy a car that is at least one year old—with cars older than five years presenting the best value.
3. Pay Off High Interest Debt First
It's a good idea to pay down your high interest debt first when starting a savings plan. This will take a load of your shoulders and help you build momentum in your goal of becoming debt-free.
According to creditcards.com the average Annual Percentage Rate (APR) on a credit card is 17.64% in the United States (March 6, 2019). Keep in mind that only 43.8 percent of credit cards are paid off in full each month in the United States.
These figures are insane and further prove my point that high interest debt should be paid off first.
4. Automate Savings
Setting up an automatic savings plan is a great way to reduce your month to month spending.
Here are two great ways to automate your savings:
- Setup direct deposit so your pay check is automatically split between multiple accounts.
- Schedule automatic transfers. This lets you automatically transfer money from your checking account to a savings account—reducing the likelihood that you'll find yourself out of cash before your next pay check.
You can adjust the size of these transfers at any time—giving you freedom to save at whatever rate suits your needs.
5. Cut Back on Entertainment Spending
Spotify premium, Netflix, Amazon Prime, you can live without them, but do you really want to? Here are some great ways to cut your entertainment spending—without giving up your favourite services.
Assessing Your Internet Plan
Do you really need unlimited internet at 1Gbp/s? Probably not.
AT&T has a plan for $50 a month that includes 1000GB of data at a download speed of 100mbp/s. This is more than enough for most people and I recommend that you assess your internet plan for potential savings.
Consider Cancelling Cable
There are many cheap alternatives to cable TV—as I will explore below.
Streaming services such as Netflix and Amazon Prime include movies and TV shows as part of their library.
Netflix subscriptions range from $10-$18 monthly—depending on the amount of screens you need and your preferred picture quality.
While Amazon Prime will set you back $119 a year or $12.99 per month. And includes free two-day delivery (one-day in some areas), rapid delivery for a fee through Prime Now—streaming music and video and other benefits.