Find Hidden Money
Trying to save for a house? For college or retirement? Instead of just earning more money, find ways to get more for less. Or find areas you are spending money for something you don't use. Hidden money is out there; you just have to find it!
Excerpts from "Managing Money without a Strict Budget"
by Paula Pant on The Balance
Always Look for Deals
If you approach every expense with a money-saving, money-conscious mentality, you'll be able to pare down your expenses without necessarily needing a line-item budget. Don't be afraid of coupons and clearance racks!
There are tons of great deals out there if you just look for them. Compare prices online. Use free apps, like barcode scanners, to comparison-shop while you're inside a store. Create do-it-yourself projects. Cook meals from scratch. Switch to LED lights, which will save your electricity costs.
Even if you're not going to create a paper-and-pencil budget, you DO need to pay attention to the details of your daily habits.
Search Your Credit and Debit Card Statements for Hidden Fees and Charges
Did you get automatically renewed into a subscription that you no longer wanted? Were you accidentally charged too much money for a product? Did you get hit by a fee or penalty that you might be able to negotiate away?
Do yourself (and your credit) a favor by looking at every monthly statement you receive and making sure that all your expenses are legitimate. Hidden fees and unfair charges are common, so make sure you review your statements regularly.
Open Sub-Savings Accounts
Saving money for the long-run should be as important as managing money in the short-term. What does that mean? Essentially, it means that you shouldn't get so overly caught up in the minutia of day-to-day penny-pinching that you ignore your long-term goals, such as emergency funds, retirement, and home and car maintenance.
Decide how much money, per paycheck or per month, you want to devote to each of your long-term goals. Then automatically withdraw that money every two weeks or every month into a savings account earmarked for that specific goal.
For example, you might open additional savings accounts that allows you to create little sub-savings goals, such as "Buying a New (Used) Car" or "Paying for Next Semester's Textbooks." You can make an automatic withdrawal from your checking account into each of these sub-savings accounts every two weeks or every month.
Analyze Where You Spend Your Money
Okay, so you're not making a line-item budget. But you can still be conscious about where your money is flowing. If you find yourself ordering beauty products on Amazon weekly, or if you notice that you're going out to dinner with your friends twice a week, you've identified a large drain on your wallet. You don't necessarily need a spreadsheet to tell you that you're spending a lot—you just need to become more conscious of it.
Set Specific Financial Goals
Figure out how much you need for a down payment and closing costs, how much you want to save for your child's college education, and what deadline you want your credit cards paid off by. Get organized by setting specific goals with deadlines. Then work backward to figure out how much you'll need to save each month to achieve that goal.
Follow the 80/20 Rule
At a minimum, you should save 20 percent of your take-home pay. If you don't want to line-item every detail in your budget, then—at the very least —automatically set aside 20 percent of your take-home income, and spend the rest. I refer to this as the 80/20 budget.
The 20 percent income that you're saving should be earmarked towards long-term expenses, such as retirement, making a down payment on a house, creating an emergency fund, or pre-paying your mortgage early. It should NOT be used for short-term savings goals like buying a new dishwasher, which is a discretionary purchase.
Invest Your Income
There's a limit to how much you can earn and save. But when you put compounding interest to work on your behalf, your money begins to grow at an astounding rate. So start investing early in life, engage in dollar-cost averaging, stick with low-fee index funds, and enjoy the process of watching your money double or triple!