Learn effective ways to start saving money in the new year and take control of your finances for a successful future.
You can start saving money even with a small salary if you make a clear plan and save regularly. Some people find strict budgeting systems suitable, while others find it easier to start with game strategies. Therefore, we will tell you how to start saving money in several ways – choose what is closer to you. Most of the methods were invented for cash transactions, but some of them can be used online.
What are the advantages of these methods and who are they suitable for?
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Suitable for those who are just starting to plan a budget and save money. It is easier to work with small amounts. If income and savings grow, then they can be put into a deposit or savings account at interest.
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Cash that is strictly allocated and kept at home will stop you from making impulsive purchases. If you keep all your funds on a card that you carry with you, there is a risk of breaking down and buying something you don’t really need.
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You can see how much money you have at your disposal. Behavioural economics research shows that people spend 12-18% more when they use cards instead of cash. This is because you don’t feel like you’re handing over real money.
Let us warn you about the downsides right away.
Using cash involves some complications :
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There will be no interest on savings, as in bank deposits, and no cashback on purchases.
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Inconvenient when paying for online purchases and subscriptions to services.
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Cash savings can be lost.
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You will have to record all your income and expenses yourself.
Envelope method
One of the most popular ways to plan a budget is the envelope method , which has many variations.
This method is suitable for those who are just starting to understand their finances and are trying to understand where the money goes. Also, with the help of envelopes, you can learn to save money, even if you have a minimal amount. The method is designed so that all the amounts for your expenses will be clearly divided. Therefore, you will not accidentally spend the money you saved up.
How to implement this method into your life:
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Write down the main categories of expenses. Start with regular and necessary expenses: food, utilities, rent, transportation. Then remember your irregular expenses: insurance or gifts. Add a savings category.
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Track your spending in a diary or app for at least a month . Then calculate how much you spend per month on each category.
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For each category, create an envelope and determine the amount of expenses. Make sure that the total amount of expenses does not exceed your monthly income.
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Write on each envelope the category of expenses and the amount to be put in it.
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If your salary comes in several installments, divide the amount for each envelope by the number of payment periods. Let’s imagine that you have 5 envelopes and you put 14,000 rubles in each. You receive an advance at the beginning of the month – 25,000 rubles, and a salary at the end of the month – 45,000 rubles. Immediately divide the advance for each envelope – 5,000 rubles, and then add another 9,000 rubles after the salary.
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Take money to pay bills only from the appropriate envelope. If you do not know exactly how much you will need, it is recommended to take the envelope with you.
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If there is money left in the envelopes at the end of the month, there are two options. You can leave it there for expenses for the next month. Or add this money to the savings envelope or the envelope for unexpected expenses.
The Six Jug Rule
This way of planning a budget is one of the modifications of the envelope method. It was described by businessman and motivational speaker Harv Eker in his book “Think Like a Millionaire.” He developed this system after earning and then losing his first million. Eker realized that his failure was caused by poor money management skills.
Unlike the envelope method, here all expenses are divided into 6 specific categories. And on the jugs they write not the amount, but the percentage of the monthly income. If the income grows, there will be no need to recalculate the entire system.
In addition to expense categories, this system provides for several savings accounts at once. Using the jug method, you can simultaneously save for your future pension, education, and major purchases. And at the same time, you can indulge in recreation and entertainment.
How to distribute funds in jugs
In the instructions, Ecker indicates approximate percentages. They can be changed depending on your income and goals.
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Necessary expenses account – 55%. This is the jar that should hold the most money because it ensures that you can pay for everything you need to live a normal life. This includes groceries, housing, gas, bills, or debt repayments.
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Financial Freedom Account – 10%. The money in this jar will help you achieve financial freedom in the future. It should not be spent, but rather set aside for investing, creating passive income streams, and planning for retirement.
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Entertainment Account – 10%. According to Ecker, to truly achieve financial freedom, you need to be happy and have fun. So, despite saving, you need to leave some money for entertainment.
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Long-Term Savings Account – 10%. This jar is designed to put aside money for major purchases: a new phone, a car, a vacation. You can’t take money out of this account every month. It’s better to set a specific goal right away and calculate how long you’ll be saving for it.
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Educational account – 10%. Money for self-improvement is an investment in yourself.
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Gift and Charity Account – 5%. These funds can be used for good deeds or gifts to family and friends.
Scheme 365
This scheme is not a full-fledged way to distribute a budget. It is rather a life hack on how to create a useful financial habit. The point is that you need to put money aside every day for your goal. Therefore, this scheme is great for the beginning of a new year.
There are several options on how to use it.
1. The first option, for beginners: choose a fixed amount – it could be 10 rubles, 100 rubles, and so on – and put it aside every day.
2. The second option for more advanced and financially secure people: increase the amount every day according to the chosen principle. The step with which the investments will grow must be chosen independently. For example, the amount can increase twice or only by a few rubles.
3. The third option involves using a table where amounts from 1 to 365 rubles are indicated. Every day, you need to put aside one amount and cross it out of the table. This scheme is the most flexible, as it allows you to put aside a larger amount on financially favorable days, and limit yourself to just a few rubles on less favorable days. At the same time, the action will still be regular.
Gauss method
A popular life hack shared on TikTok by Australian Becky Turosi. It is somewhat reminiscent of the third version of the 365 scheme. However, here the basis is not the calendar, but the story of the 19th-century German mathematician Carl Friedrich Gauss. Even in elementary school, Gauss derived a formula according to which the sum of all numbers from 1 to 100 is equal to 5050.
Turossi took a regular piggy bank, wrote a number from 1 to 100 on a sheet of paper, threw in a bill with the number 50 and crossed it out on the sheet. Thus, in 100 days or earlier, if you make several investments per day, she will be able to save 5050 dollars. The method can be used for any currency.
Challenges
Challenges will not teach you how to plan a budget, but they will help you save up a certain amount in a playful way. And thanks to them, you can also form a habit of saving.
Weather Challenge
Financial blogger Melissa Berry said that she has an unusual ritual. Every Wednesday, she looks at the weather forecast and puts aside as much money as the thermometer shows. If the weather is below zero, you can simply ignore the negative value. In this way, you can put aside an amount in rubles, adding tens, hundreds or thousands to the number of degrees, if your finances allow. So, for 3 degrees you can put aside 30 rubles, and for -35 degrees already 350 rubles.
5 dollar challenge
The challenge, which has become popular on YouTube , originated in America. Its essence is that for a year you need to put aside every 5-dollar bill that you have. To adapt the challenge to Russian realities, you can try putting aside every 10-ruble coin or 50-ruble bill.
52 weeks
This challenge has two options . You can either set a fixed amount, for example 1000 rubles, and put it aside every week in full or in parts. Or you can determine the step with which the amount of savings will increase. So, in the first week put aside 100 rubles, in the second – 200, in the third – 300 rubles, and so on. This challenge is also ideal for the beginning of a new year.