As I mentioned in my previous post, many people struggle with saving money. The past few years have been characterized by excessive consumption with little regard for saving. Since debt was so accessible, many Americans were spending more money than they had. With the recent economic recession, Americans have been forced to cut back on their spending to pay off debt and save for an extended recession. I think saving money starts with a certain mentality and requires specific goals.

Here are 6 key ways to curb your spending habits and to start saving money:

1. Budgeting – This is a very basic way to get your finances in order. The objective of this exercise is to determine where your money goes and to make sure that you spend less than what you earn. Make a budget for yourself and stick to it. Include all your living expenses, but also set aside a reasonable amount of money to spend on entertainment. However, make sure that you do not spend more than the amount you set for yourself.
2. Determine where to cut costs – After you set a budget for yourself, go through each of your living expenses and see where you can cut costs. Do you really need all those TV channels that increase your cable bill? Do you need to eat out so many times a week? Can you cut costs on your grocery bill by using coupons and looking for deals? Go through each of your expenses and ask yourself if they are really necessary. If they are, ask yourself if there is any way you can reduce that amount.
3. Don’t go shopping if you don’t need to – This is simple. If you don’t need something, don’t put yourself in a position where you’re going to end up buying something because you think you need it.
4. Always shop around – If you determine that you really need something, always shop around to find the best price. You can compare prices online or ask friends if they know where you can get something inexpensively.
5. Pay yourself first – When you set your budget, make saving one of your expenses. Pretend that one of your bills is to pay yourself. Set a certain amount per month and put it into a savings account that you will not touch unless in dire need. I would suggest starting with something like 5-10% of each paycheck. Over time, this will become a good emergency fund. Your goal should be to have about six month’s worth of pay saved up in an emergency fund.
6. Set goals for saving – It helps when you are saving for something in addition to your general savings. For example, I am currently saving to buy a house. I have a separate savings account specifically for my savings to buy a house. If you have a goal in mind, it makes saving a lot easier. However, do not replace your general savings/emergency fund with saving for a purchase.