How to Save Money like its Going Out of Style

In today's world of Paris Hilton and Pork belly politicians, its easy to want to spend big too. However, saving money has never been more important than today. These few steps below will help you stash away the cash, and keep your money in the bank.

1. Monitoring Spending - The Cash Method

One way to monitor your spending is to use only cash. Determine how much cash you need during the week for groceries, gas, etc, and then put away your debit and credit cards. Carry a notepad around with you and jot down where you are spending your money. This will allow you to see where all your money is going.

By using cash for everything, you can easily monitor when you are running out of money. Unfortunately, so many people only use debit or credit cards to purchase items; they simply do not know when they have spent too much. This exercise will help you to further analyze your spending habits and where you will be able to save money each month.

2. Decrease Fixed Expenses

The cash method will not help you save on many of the fixed expenses that you have such as car insurance, rent or mortgage payments, homeowners insurance, life insurance, or other expenses. However, with a little effort, you can lower these cost as well. For example, you can often get a better car insurance rate or lower mortgage payment.

Reduce Car Insurance expenditures

Many times we get a car insurance policy and never take a look at it again for a number of years. This is not a good idea. Insurance companies are always competing on price, and you may be able to decrease your cost by simply switching carriers.

When getting your insurance quote, you may also want to consider raising your deductible. The higher you raise your deductible, the lower your monthly payments will be. The deductible is the amount that you would have to pay out of pocket before your insurance coverage would kick in. However, the amount of savings that you could accumulate by simply requesting a higher deductible could make it well worth it.

Reducing Homeowners insurance payment

Another, fixed expense that you may want to consider switching is your homeowners insurance. Again, if you have not even looked at other insurance carriers since you purchased your home, you should at least see if you could be saving money. In addition, if you are willing to increase your deductible your payments will be lower each month.

In addition, it is also important to remember that you may be able to get a discount if both your Homeowner’s insurance and car insurance policies are with the same company.

3. Set a Savings Goal

Setting a goal is very important because it gives you a sense of control. You will be able to see that you truly are on the path to achieving your financial dreams. As you consistently save and invest, you will be able to grow your personal wealth.

For example, let’s say that you were able to reduce your car insurance, and you used the cash method to save a total of $150, $250, or $500 each month. The calculations below show the growth of this money compounded monthly at an annual rate of 12% over 30 years.

$150 per month at 12% = $524,244.62
$250 per month at 12% = $873,741.03
$500 per month at 12% = $1,747,482.07

The point is, if you are able to save even $150 per month, you can build up a nice little nest egg. If you can save $500 per month you can retire with well over $1 million. You may already be aware of this, but in order to make it work, you must establish a plan.

To help you establish a solid financial plan, and a continuation of this article, see the resources below.

Spencer has a BA in Finance, an MBA, and is currently a Commercial Banker advising Business owners on Business and Personal financial issues.