How To Increase Your Savings (Step 2)

Matt | Personal Finance

In this Short, we'll walk through Step 2 from my latest YouTube video that can help you grow your savings without making drastic changes to your lifestyle.   I share the exact steps I took to double my savings, and how you can apply these same strategies to achieve your own financial goals. Whether you're saving for a big purchase, an emergency fund, or long-term wealth, these tips will help you get there faster.   #savingmoney #saving #savingtips #personalfinance #moneytips

Transcript

00:00The second step to increase your savings is to focus on reducing your biggest monthly expenses

00:05and to optimize your spending. No more than 50 to 60 percent of your income should be covering

00:11need-related costs. These are fixed costs like rent or mortgage, utility bills, your day-to-day

00:17food and transportation, as well as any other costs that make up your essential living expenses.

00:23Housing, transportation and food are the three biggest expenses for a typical household,

00:28and finding a way to save on these will make the most difference to reducing your fixed living costs.

00:33For example, could you renegotiate your rent? Maybe you could agree a longer tenancy term and by giving

00:39your landlord assurance that you'll be in the property for a longer period of time,

00:43it might enable you to agree a lower monthly rent cost. Another way to reduce costs could be to use

00:49a comparison website to switch to a lower cost provider for things like your utility bills,

00:54internet and insurance. It can be tricky to stop your expenses from ballooning, particularly in high

01:00cost of living locations, unless you consciously manage it and set a ceiling. So capping your fixed

01:06living expenses at 60 percent of your income helps to keep this in check. Optimizing your spending is

01:12also important to be able to save more. No more than 20 percent of your income should go on your wants.

01:18It's so easy to get caught up with a new trend or latest version like the newest iPhone and we

01:24instantly convince ourselves that we need it, even if our current phone works completely fine.

01:30When you're in this moment, it's a good idea to pause before buying and ask yourself,

01:35do you really need it? If you're really focused on saving, then you have to be tough on your

01:40discretionary spending. It's really common for your wants to merge into your need related costs

01:45or exceed that 20 percent threshold of your income. But ultimately, it's just going to derail your

01:52savings goal. If you decide that you do still need it, then think about how you can get it for

01:56cheaper. For example, using a comparison website, buying it secondhand, getting a cheaper alternative

02:02or waiting to buy it in a sale. The other key thing, if you want to save more, is to pay off any

02:08high interest debt that you have. For example, car loans, personal loans, credit card debt or student

02:13loans. You really want to do this before you start saving, as it usually costs more to borrow money

02:19versus the returns that you get on saving. If you have $2,000 in a savings account with a 4% annual

02:26interest, you'll earn $80 after one year. But if you have credit card debt of $2,000 with a 22%

02:33interest, it will cost you $440 over that same year. High interest debt is always going to grow faster

02:41than your savings. So if you have any, pay it off first. And once it's cleared, then you can build

02:46your savings.

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