24 November 2020

Introduction

Saving money is crucial if you want to purchase a home, but most of us have a lot of saving potential within our personal finances that we aren’t aware of. You want to hit on that untapped potential. Have you ever looked at your spending and realized you had no idea how much money was coming out of your wallet that month? Your saving habits are the difference between remaining in a rental unit and purchasing your own home, so you want to fine-tune them to perfection!

Below are the most important strategies to saving money fast and effectively, as well as detailed examples of the results they create and what change they will make to your life.

Create a Budget

This is relevant to your priority of paying off any current debt you have, but that is just one piece to this larger puzzle. When creating a budget for your personal finances, most of the work is done at the beginning—building the foundation. Establishing all of your expenses, putting everything down on paper, and creating the budget itself based on your income and expenses. After that, you just have to stick to your budget—this is easier said than done, but you can do it!

I will do an in-depth tutorial with a step-by-step guide for how to create a budget in another post. In this article I’ll go over the basics of budgeting.

Here is a list of steps to help you set up the foundation of your budget:

-  Determine all of your expenses (I usually use monthly data, but you can choose whatever works for you)

-  Categorize them

-  Calculate your income

-  Figure out what expenses can be eliminated or cut back based on the information in this article

-  Apply those changes to your expenses

-  Insert everything into your spreadsheet

At the end of these steps, you should have something that looks similar to this:

You can make the aesthetics as creative as you want, but I find simplicity helps tone down the difficulty of budgeting. This can be seen in my boring, colour-coded spreadsheet...it does the job! But don’t be afraid to have fun with it! Choose whatever colour pallet you want, something that you’ll enjoy looking at on a daily basis.

I also have a separate spreadsheet in which I input all my spending to track expenses and ensure I’m sticking to my budget. It’s as simple as tracking what amount of money you spent, when you spent it, what category you spent it on, and tracking weekly spending totals.

Mine looks like this:

In addition, you can find some common budgeting strategies that will show you some different money-management methods (say that 5 times fast!).

Aside from spreadsheets, there are plenty of budget apps out there that can make it easy to create an organized budget that you always have with you.

Books are also a great source of knowledge around budgeting. They can teach you different outlooks on finances which will, in turn, change the way you view your budget and dictate how effective it is.

You can learn more about budgeting your finances the way wealthy people do in The Millionaire Next Door by Thomas J. Stanley, Ph.D, and William D. Danko, Ph.D. Pages 40-70 specifically cover budgeting, but keep in mind some of the content is related directly to American finances.

Conclusion

It’s vitally important you understand the criticality of having a budget and sticking to it. I’ve never found it to be the most enticing activity in the world, but the results are extremely rewarding. Think about your position in life right now; your income, expenses, age, relationship status, job or career. 

Look down two paths, one in which you create and commit to a budget and one in which you don’t. Which path is going to lead you to saving enough money for a home much sooner in life? Which one will result in your increased financial discipline and money management skills?

We’ve all done this in some area of our life, be it going to the gym, reading more often, eating healthier, or other good habits. I believe you’ll find that a budget has the potential to create massive changes in your life.

What is the largest impact you believe a budget will have on your life?