Money doesn’t grow on trees, and unfortunately, neither does the appropriate knowledge to understand it. Whether it’s a past-due bill or a significant amount of student-loan debt, most of us must deal with financial issues day in and day out. With economic issues like wage stagnation and volatile stock market, people might be less inclined to save, but saving is still critical.
There are plenty of methods and rules of thumb to help you reach your financial goals. However, how do you know which ones to follow? Top bankruptcy attorneys in Scottsdale recommend the following three strategies for saving money.
Track Your Spending
If you want to save more money and spend less of it, you have to know where that money is going, to begin with. Budgeting tools like Mint or You Need a Budget make it seamless to track your spending.
When you see all your purchases in one place, it’s much easier to understand where you are financial. Furthermore, you can also see exactly how your past decisions have brought you to where you are today. For example, if you feel that you eat out too much, seeing that number can be a motivating eye-opener.
Use the Snowball Method to Pay Down Debt
If your goal is to finally eliminate debt this year, you are already on the right track. When you pay off your debt, you free up your money for financial goals. There are two basic strategies for eliminating debt: pay off your highest-interest-rate debts first OR pay off your smaller balances first. While the former makes more sense mathematically, research reveals that going after your smallest balances (the snowball method) first is the most effective.
Here’s how it works:
List your debts according to balance, then tackle the smallest balance first while you make minimum payments on all other debts. Once your smallest balance debt is paid off, use the money you were throwing at that debt to pay off the next smallest debt, while making minimum payments on the others, and so on and so on until you finally reach debt freedom. The idea is, when you’ve paid off a debt, you feel motivated and powerful, which gives you the momentum to keep going.
Pay Yourself First
Pay yourself first is the notion of always cutting out a part of your paycheck and saving it prior to spending money on other things. This is easy to implement because it can be automated by setting up a recurring transfer from your checking to savings account each payday.