If you're short on cash you have two options.
Either you make more money, or you spend less.
Ideally, you should do both but often enough you can only make adjustments on the spending side.
But how do you save money when you're already earning very little in the first place?
With a bit of change to your lifestyle, it's possible.
#1 Track your expenses
Before you can start saving any money, it's absolutely crucial that you're well aware of your monthly expenses.
Some people track every single purchase including those occasional ones such as replacing the old bed, buying a new computer, car repairs etc.
I think those irregular expenses are too volatile and don't give you the realistic month-to-month view of where your money goes.
Also, most of the time you can't avoid them so there's not much room for improvement here.
Instead, I only focus on recurring purchases such as groceries, drinks, eating out, gas, rent, utilities, mobile internet, App Store apps... You get an idea.
The hardest part about tracking your cash flow is persistence. You'll have to create a habit of writing down every single relevant item.
Even after years doing it, I still miss some transactions here and there.
However, don't worry if you forget to write down some transactions.
Drawing conclusion based on some data is better than having no data at all.
#2 Prioritize expenses
After you get a clear picture of what you spend on, sort those expenses based on an importance. You will later use this data to get rid of some of the unnecessary cost (if any).
Rent and food would obviously be the top of the list since those are essentials. The rest follows.
My list would look something like this:
- Rent & utilities
- Food (groceries)
- Mobile Internet
- Eating out
- App store
- Beauty (haircuts, spa etc)
- Fun activities
It helps visualize the ratio between the importance of each item and how much you spent on it.
You may realize that the item at the bottom of the list makes up 30% of your expenses That's where you
That's how I learned that alcohol was more than 50% of my cost first few months I moved to Taiwan.
Now that you have your priorities right, you want to stop wasting money on stupid shit that doesn't matter to you and put it to better use.
However, from my experience, you can never just cut the cost and put it straight into the piggy bank.
Saving money is easier when you reward yourself.
Let's say you just learned that you spend $200 on iPhone apps each month but don't really use most of them. It represents's a pure cost that doesn't add much to your life and there's no reason to waste that much.
I would cut the cost in half, save $50 and put the extra $50 towards an item higher on the above list such as food or travel.
You just saved yourself $50. But most importantly you rewarded yourself with something that matters to you without any hard feelings about cutting the cost elsewhere.
Test this approach for a month and see if you feel comfortable lowering the cost even further. You may eventually even get some items off the list completely.
#4 Make a budget
While optimizing your cost, you're getting an idea what the realistic monthly budget could be.
I said "realistic" because there are expenses and needs at the top of the list that has to be met + nice extras that you can, but don't want to live without.
Let's say your minimum cost is $1000, important but not necessary items from the middle of the list cost you $500, and the total spending is $1800 because you haven't completely gotten rid of those unimportant things.
Thus, your realistic budget is within $1000 - $1500. Optimally, you want to get closer to the lower value, but if you can just make it within the range you're already saving at least $300 + anything that's left of your salary.
Don't beat yourself over not sticking to your budget or not moving towards it fast enough. What matters is that you're able to save at least as much as the previous month.
Your goal is to save money comfortably not to live on $2 per day.
#5 What are you saving for?
This perhaps could have been the first point of the article. People rarely save with no vision.
Sometimes, knowing what you're saving for and how much you need to save first may make cutting the cost and deciding on the budget much easier.
It depends on the person, I like to do it the other way around.
However, you'll have to create a goal eventually because saving for nothing doesn't make sense.
When it comes to goals, many divide them into short and long-term ones.
Personally, I don't assign importance to something based on the time frame. Instead, I have a look at my needs and wants.
I focus on savings that go towards needs such as my emergency fund (at least 3 years of living expenses), retirement, weekly/monthly investment in cryptocurrencies, buying a house and so on.
Wants are represented by things that I want but don't necessarily need like buying a new motorcycle (I already have one that works), a new iPhone (why not), vacation etc.
I will obviously save a higher chunk of money for the former and put the rest in the latter.
Make it easy for yourself with a mobile app
Earlier, I mentioned that you will have to create a habit of tracking your expenses.
You could use Microsoft Excel to record your cost, create budgets etc but we live in the 21st century.
There are a plethora of mobile apps that help you better track and categorize your spending.
I've tried many over the years, but the one that does exactly what I need while having a great UI at the same time is Spendee.
The basic free version lets you create a single wallet, a single budget, and store unlimited records.
It also notifies you to add new records daily which helps you building the above-mentioned habit.
With Spendee, you can easily categorize transactions, tag it, add location to it, attach a photo of a receipt etc. When traveling abroad, you can even record your cost in a foreign currency.
At the end of the month, you can see an overview of your money flow on a beautiful screen.
It instantly gives you a hint about the room for improvements.
Clicking on a category then shows you relevant transactions, average expense, busiest day and more in the given month.
The one feature that I particularly like is being able to quickly see the state of my budget for a tracked period.
The app even notifies me when I'm about to go overboard.
If you are serious about tracking your cash flow and saving money, you may want to consider purchasing their premium subscription which starts at 1.42€ and offers more useful features such as the synchronization with bank accounts, unlimited wallets, budgets etc.
I'm pretty good at managing my money so I haven't reached that point yet, but I'm considering because I'd like to split every day expenses from the travel ones.
As you can see, saving money doesn't have to be difficult.
It all comes down to identifying your unnecessary cost and redistributing it in a way that lets you save money without having any negative impact on your living standards.
What are your tips to save money with a minimum effort?
Please let me know what you think in the comments section below.