It’s that time of year again.
You know, tax time. And while it’s probably one of those moments that you loathe there are some good things about this time too. If gives you the chance to think about your finances and planning your financial expenditures for the new year.
If you are like me, you are probably wondering how you can save for travel, life, and other expenses.
Life is expensive, so what do we do?
So here are a set of tips to help you get a hold of your finances and plan for saving for travel or whatever life has in store for you.
Just so you know, this isn’t a quick step, it is a set of specific goals. Don’t expect it to all happen tomorrow if you are just starting today. But if you never start, you’ll never reach the goal either.
Take Stock of your Financial Health
Do you know your net worth?
Do you know what net worth means?
Do you know how much you take in vs. how much you spend?
Do you know what you spend your money on?
These seem like simple questions, but actually, most people don’t know the answers for their situation. This is a problem. How can you know if you are saving or how much you are saving if you don’t have a handle on all the money coming in and going out?
There are several ways to do this. You can start going through your accounts, checking, savings, credit cards, retirement savings, brokerage accounts, loans, whatever you have. Some people certainly have more than others, I know I have probably more accounts than I need (such as more than one online banking account).
There are several ways to track this, either get a spreadsheet or some software to help you do this. For software, I recommend using either Mint or Personal Capital. Of the two, honestly I prefer Personal Capital as it does a better job I think of tracking things like stocks and retirement accounts vs. Mint.
There are other options too such as Hello Wallet, Quicken, You Need a Budget, and several others.
Mint vs. Personal Capital vs. Hello Wallet
Of the many options, I’ve most extensively used Hello Wallet, Mint, and Personal Finance.
I like Hello Wallet in that it does a good job of being “budget oriented” and financial health oriented however lacks in investment type tracking. And Hello Wallet is not free (I got it as part of a benefit from my job).
Mint is great too. I like how well it tracks a lot of my expenses and accounts. It doesn’t do investments well but it does a better job than Hello Wallet. The one downside though is that it seems to lose connectivity to my accounts more often than some of the others and I’m not sure why that is.
My Favorite though is Personal Capital. It does a fairly good job with tracking expenses and also has some great tools for tracking investments. This way I have a good understanding of my overall financial stature and which areas have been going up and down. It also lumps all the savings/checking accounts together so I know where my cash is and where my other assets may be. If you don’t have investments though it might not be the best option for your situation.
Reduce and Simplify
Life without coffee is just not worth living.
Look, I think the websites and people who say just cut out things like coffee and such are not really being realistic. Sure if you drink coffee every day for $4 a day and cut it out you’ll save well over a thousand dollars a year. But if you are not going to cut out coffee, then these types of recommendations are just pointless.
I don’t think that is the right approach. If try to budget down to the bare minimum often we’ll just hate ourselves or find ways to cheat anyway. Sure there are times when this is critical such as between jobs, but other times you just need to try other strategies.
First: Prioritize
What are the things that you spend money on that you most enjoy? Perhaps it’s a hobby that you really love doing? Maybe it’s your morning coffee? Or possibly you really love yoga or kayaking? Is your gym membership a must? Maybe you are a foodie who just loves trying new restaurants. Take a moment a really think about where your monthly spending is going and which places are a must for you.
Be honest with yourself too. Giving up social commitments sounds like a great way to save money in theory, but in practice, it tends to really suck if that doesn’t work for you. Take a few moments and start to rank these things in how important they are to you and your well-being. Which ones you really love and which ones don’t really mean that much to you.
Second: Reduce
Think of ways to start looking at how to reduce the expenses. For instance, if it’s coffee, are there ways for you to reduce the cost associated with this? Are you willing to brew at home or perhaps you can brew at your office? If it’s a convenience thing, would something like a [amazon asin=B01BOU6CBU&text=Keurig] replace your fix at the expensive coffee shop?
Perhaps for gym memberships, think about if you really need an expensive place or if a cheaper option would do. For instance, if you never use the pool, perhaps there are options without pools that are cheaper? Instead of having a trainer, partner up with a friend to keep you motivated.
Are you ok eating out less? Maybe having dinners at home with friends instead of meeting at a bar or restaurant? Bring in lunch to work most days if you are simply just buying for convenience. Learn to cook, or perhaps or cook for the week if finding the time is a problem. Perhaps you could even look at preserving food longer through smoking meats or using a food dehydrator? One strategy I like using is a crockpot to have a hot meal waiting for me when I get back from the office.
Perhaps you could have just Netflix instead of cable?
Look at your general expenses. Are there ways for you to reduce this? Can you buy things in bulk, even if you have to go into it with friends? You can generally find some friend or coworker or family member who has a membership to one of the membership clubs like BJs, Costco, or Sam’s Club. If not, can you Subscribe and Save on Amazon.com or buy in bulk from boxed.com? (Of Note you can save $15 on your first purchase at Boxed.com)
This step isn’t about simply cutting expenses, but trying to find ways to reduce the top expenses that you already have.
Third: Cut the Excess
Start cutting out the things that matter less. Start by putting a dollar amount on the extraneous items in your budget. Is it $20 dollars? Or maybe $100 or more? That could translate to a day overseas or an airline ticket or a tour. Start to imagine what you could do with that money. Then it’s time to start hatcheting. If you don’t have excess money perhaps you weren’t honest with yourself in the other steps or perhaps you shouldn’t be thinking of saving for travel just yet.
If you don’t use your gym membership and it doesn’t matter much to you, cut it out. Don’t kid yourself that you will use it. We often like to make ourselves believe things that won’t happen.
If you go to the bars and it’s not something you really enjoy, just cut it out.
Find the hobbies or expenses that you have that are just wasting your time and remove them. Stop buying so much online if you are not using them.
These are the lower priority things and just cut them and see if you miss them. If there is something that was too hard to cut, you can add it in, but be certain you take note of what you’ll be giving up with that addition. Often once you see the extra money you probably realize you don’t miss it all that much anyway.
Fourth: Payoff and Save
The first thing you should look at is any debts you have. Debts are like imprisonment, they really do prevent you from really being free. Especially if you have any high-interest debt, pay that off as quickly as you can. Look at some of the lower interest debt and determine if it’s better to save or to pay it off. Sometimes it’s better to save or invest.
When you are ready to save, start putting it a separate account. Sure you can access if you need it in an emergency but it’s better to have it out of sight and out of mind while it’s growing. Depending on your tolerance level you might want to consider putting it in a lower risk brokerage account such as Betterment that has setups for things like “emergency savings”. Granted you could lose value but it probably has better returns than just a savings account.
Start Hustling
The best way to save money is to find ways to increase your earnings. It sounds so obvious but it is also the hardest for most people to implement.
Generally speaking, you probably have a skill. Yes…you…do. I know it’s hard to sometimes accept that. I often think the things that I’m good at are generally easy for other people too.
But that is untrue.
You might be creative, such as an artist, photographer, designer. I’m sure you could look for ways to sell your skills by other means. Perhaps you are a writer or a blogger. Maybe like me you already have a blog and just need to find ways to monetize what you already do.
Perhaps, even you could trade services with a neighbor who needs helps. Maybe you are handy in one regard and they have skills they could trade that you need.
Overall, though, starting something is one of the best things you can do for yourself. Having another stream of income will improve your life not just to save for travel but to probably help support yourself while you are away.
One caveat. If it’s a skill you use for work, be sure you won’t have an issue selling your services outside of your company. I’ve known people who’ve done this and their primary company treated them as competition. If you have enough work to be ok with that, then go ahead, but note that it might end up causing you to lose your job otherwise.
Heck, nowadays my dream is to find myself on Shark Tank. I’ve been personally working on a few different projects such as this blog, a home décor website with a friend, and a few other product designs and writing assignments. It’s been fun and a way for me to learn about many different industries. I would love to hear about your projects as well too.
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So this is just one of the ways I’ve been working on getting myself on better footing this year. What about yourself? What are your ways of improving your financial health? Are you saving for travel or other things?
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