Pianistimo:
I have had to do this all my life so it is pretty well second nature now. Mind you, it's easier for me because I can be content with very little. Even as a child I never wanted Christmas or birthday presents and my parents had to more or less force things on me.
I hesitate to advise people in other countries about saving because cost of living relative to average salaries varies a great deal depending on where you are. Nonetheless there are some broad principles which can be applied.
It is surprising to me how many people genuinely have no idea of the state of their funds from one month's end to the next. Therefore the first step is to get all the facts, together with as much history as possible and acquire a really accurate picture of cashflow. It can be done on a yearly, monthly or weekly basis but as most people have one or two large payments with long cycles so, initially at least, the downloading and examining of a complete year's transactions is a good idea. If all income and expenditure goes through one account this is particularly easy using internet banking. You can sort everything in any sequence and total each category of expense.
Classify each type of expense for regularity, size and necessity. For instance, a one-off payment for a new hot water tank is necessary and perfectly in order while a costly gym subscription only used for a couple of hours a week might be cancelled in favour of a second hand exercycle in the basement. Neither is it sensible to ruthlessly cut down minor food and drink luxuries, say a bottle of Bailey’s every two months at $20, while the kids go about in designer label clothes and rent a pile of videos and DVDs at overnight rate every second day for hundreds.
Both my two are, to put it mildly, spendthrifts of the first water, so I have had twenty-six years of ruthlessly brandishing an iron fist to keep the ship from sinking. It’s a good job I’m the sort who doesn’t need very many material acquisitions to be happy. I’m quite proud of having arrived at retirement financially intact without either divorce or rebellion.
I digress. The first step then is to know the truth and the whole truth about income and expenditure. You can’t plan without knowing everything. What I did after that was to work from high to low in amounts per category and rate each according to importance. That is to say, is it a need or just a want ? A mortgage repayment is a need; a new camera is probably a want.
Initially I just aimed to have something, anything, left from monthly salary. As time goes on this should normally become easier. I just stuffed the small surplus into a growing investment account and pretended it didn’t exist, keeping a buffer of cash in another working account. Here again, interest rates vary from country to country, so it is impossible to recommend how to invest savings. I have to say I distrust superannuation plans unless the capital gain is clearly defined and free from risk. It’s no good going without for years only to see savings evaporate because of some stock market crash; better to have small but secure divvies from term investments or mortgage trusts. This is especially true as retirement approaches.
As for the small details, I have tried these at various times:
Buy a second-hand exercycle and cheap weights instead of a costly gym subscription.
Unless your lawn is huge, use a handmower – produces both savings and health.
Cheap casual shoes are just as robust as costly ones with famous labels. This has been investigated in documentaries several times yet people still fork out four times as much as necessary.
Within reason, do as many household jobs as you can yourself rather than getting a tradesman. For example, a couple of rubber plungers ($15) kept on hand can forestall plumbers’ visits at $50 a time. Many painting jobs are good fun and cost a lot less to do yourself. Who cares if it’s amateurish ?
If possible (might not be for you) walk rather than drive as often as you can.
Depending on the phone system where you are, introduce passwords to prevent people from dialling anything you have to pay for.
Make extensive use of public libraries instead of buying books.
Find out the most economical internet payment option for the family as a whole. Children downloading gigabytes of pictures and music is NOT necessary for their education.
Discourage the establishment of any regular pattern of expense which is unnecessary. It is easy to fall into the habit of getting DVDs out EVERY week, going shopping EVERY day, kids buying lollies EVERY day, leaving electrical appliances on EVERY night, recharging cellphones at shorter and shorter intervals. In general, irregular treat = okay, regular treat = not okay (unless clearly budgeted).
Fiddle use of bank accounts and credit cards (if you really must have these latter) to produce the minimum overall total of fees. It isn’t hard to do. Many people don’t even know what their banks are charging them. Be especially wary of direct debits.
Check all bills ruthlessly. Mistakes DO happen. Charges ARE often wrongly made. Accept nothing at face value.
Topic: how do YOU save money