Simple Ways to Cut Your Budget and Start Saving

If you have never been a saver, putting away money for unexpected events such as a job loss or major medical situation may seem like an impossible task. But the cold hard facts are that getting out of debt and achieving financial independence very much depend on your having an emergency fund, formulating a budget and living on it, and learning how to creatively cut your expenses.

Most financial experts agree that everyone should have at least three months worth of living expenses stashed away in an emergency fund. Conventional wisdom says that at least six months is the actual minimum amount to work towards but if you are just beginning to save, start small and keep increasing what you put away until you reach your initial goal. Then continue to grow your money. There is no such thing as having too much savings.

There are simple things you can do every month to cut your expenses and increase your savings. But in order to do this, you have to know where your money is going. This means sitting down and going over your monthly expenses down to the smallest detail. Surprisingly enough, many people have no idea what they spend each month or for what. Living within your means and having financial security (growing savings accounts for emergencies, special purchases, and retirement) are impossible without knowing your overall financial picture and actively controlling your spending.

The following are suggestions to help you get started. By incorporating these ideas into your everyday spending habits, you can begin to cut expenses and increase your savings.

• Make a budget. Create a budget. See what you're spending. Keep all receipts! Once you have a clear picture of what you are spending, you can determine where to make cuts. No successful financial plan will work without an honest budget.
• Pay yourself first. If possible, have your employer deduct a certain amount from each paycheck and deposit it directly to your savings account. This process means you never see the money in the first place and don't have to think about.
• Put away the credit cards. Unless you are able to pay off your credit card balance in full every month, don't charge any purchases. Studies have shown that consumers who use cash to pay for items are much more cautious when deciding whether to buy something. Leave the credit cards at home. The results can be amazing in terms of saving money.
• Impulse buying can destroy a budget. Repeat this sentence as often as necessary. Ask yourself if you really need this item. Enforce the 72 hour rule. Give yourself at least three days to think about the purchase before making a decision. Most people find this "cooling off" period allows them to think more clearly. The initial excitement usually is gone after this time also. If you know going to the mall will present too much temptation, then don't go.
• Save on gasoline. Fuel prices are continuing to rise. Try to arrange carpooling with co-workers if possible. Consider public transportation, if available. Some companies allow workers to telecommute at least one day per week so look into this possibility. When running personal errands, plan your schedule to include as many as possible (grocery, bank, dry cleaners, etc.) in one trip. This can add up to significant savings.
• Cancel your landline phone. If you primarily use your cell phone, get rid of your house phone. There's no reason to pay for services you very rarely use.
• Cut your cable TV services. Paying for premium movie channels can really add up! There are many places to rent movies inexpensively both online and at retail outlets. Only pay for services you truly use.
• Pack your own lunch. With the price of most lunches costing around $10, bringing your own from home just one or two days a week can result in big savings.
• Use coupons, store specials and rebates. When grocery shopping, use coupons for items you buy. Plan your weekly meals and only buy what you need. The most dangerous time to grocery shop is when you are hungry! Make sure you have a snack or meal before you go. Consider replacing national brands with store brands. They are usually the same quality but cost much less.
• Free entertainment. Most cities offer a wide variety of free entertainment. Local newspapers and websites offer detailed listings of cultural events, such as concerts, art festivals, museum exhibitions, and other events.
• Eat at home. It's no secret that eating at home is almost always less expensive than eating at a restaurant. Americans love to eat out and many for nearly every meal. If this describes you, consider cutting back to just a few times a week. Preparing your own meals not only saves money, but it allows you to choose the freshest ingredients and control portion sizes. It's definitely healthier!
• Involve the entire family. To successfully change your spending habits and start saving, everyone needs to be on board. Saving together as a family sets a wonderful example to your children. Teaching them the importance of living on a budget and saving wisely is a gift that is truly priceless.
• Always be aware of your bank account balance. Most people use debit cards to pay for even the smallest purchases. With smart phones and online banking, it's relatively easy to check your bank balance quickly and safely. Don't risk overdraft fees and bounced check fees. Get in the habit of checking your account daily.