Fundamental Strategies for Saving Money

I recently watched a movie titled Living on One, a documentary about four college students’ efforts to spend a summer in Guatemala living on a dollar a day. (The movie is available on Netflix and is worth an hour to view.) As 50% of the citizens of Guatemala live on less than a dollar a day, the film explored the personal finance habits of people who have a hard time earning enough money to live on, much less save.

My favorite segment of the film discussed the concept of savings clubs, a popular strategy in less developed areas of the world. To illustrate how a savings club might work, consider a group of 12 individuals who each agree to save $12 every month. However, each member contributes their $12 of savings to the group every month, and one of the twelve members keeps the full sum of $144. The member taking the lump sum alternates each month, so that consequently, every member of the club receives $144 once per year.

As you likely already see, the purpose of the savings club is not to achieve investment growth. Each member contributes a total of $144 to the club each year (12 contributions of $12), and every member receives $144 once per year in return. So what’s the point?

The point is that in the arena of personal finance, it is often more beneficial to receive a large lump sum occasionally than to receive a smaller amount more consistently. In Guatemala, a large lump sum can be used to purchase a stove to cook food, while in more developed parts of the world a lump sum might be used to purchase a car or as a down payment on a home. The $144 lump sum is more valuable than simply saving $12 for 12 months because humans find it difficult to save money they have access to. Having smaller amounts of money available that can spontaneously be spent on nice dinners, vacations, or other small ticket items can ultimately be a drag on a person’s savings efforts.

Another benefit of the savings club is that they force individuals to prioritize savings. If a member of the club can’t contribute their $12 during any given month, they are kicked out of the group and will not collect the $144 lump sum they have been counting on. A factor that motivates savings is indescribably beneficial. Most people earn a salary, pay bills and have fun with that salary, and intend to save any funds that are leftover. Unfortunately, for most people very little is left after maintaining their standard of living, so very little gets saved. When we prioritize saving, we earn our salary, achieve our savings goal as soon as income is received, and find a way to live off what is left. This tactic ensures we are saving the amount required to meet our financial goals.

Some Great Tips on How to Save Money

1. Gift Wrapping Papers

Why buy expensive gift wrapping papers from the market, if you can make them at home? Plain brown grocery paper bags are what you can begin with. Take out your painting brush and craft paints. Give your imagination a free run. Remember that the sky is the limit, so far as your creativity and imagination go. Paint any design and rest assured that your effort would be well appreciated by those who receive your gift. You can paint flowers, trees, butterflies, bees, birds or whatever fancies you.

2. Saving on Gifts

Everyone loves receiving and giving gifts. If you have a large family, you may end up spending a lot of money buying gifts for each member, and receiving gifts you may have no need for. You may talk to your family members and come to an understanding to limit the giving of gifts to children only. This way you keep the children, who love to receive gifts, happy, and save a substantial amount of money too.

3. Homemade Gifts

Everyone loves receiving gifts. A homemade gift is any day more appreciated than gifts purchased from the market. One can actually feel the warmth that is associated with homemade gifts. If you have time on hand then there is no dearth of opportunities to exhibit your skills. You can make gifts for birthdays, anniversaries, weddings, Christmas gifts, babies and more.

You can knit a sweater or a pair of booties for a little baby; make cakes for occasions, or weave baskets. There is no end to what you can create at home. Wrap your gifts with homemade packaging and tie it with a bow.

4. Movie Shows

If you are a movie buff, you must know that matinee and late afternoon shows are cheaper than nighttime or late night shows. If you are planning to treat your family to a movie, take them during the day. The savings could well be more than half of what you normally spend. It is as good as seeing two movies at the cost of one nighttime movie.

Eateries inside the movie theater offer food at prices that can burn a big hole in your pocket. It would be a great idea if you carry some homemade popcorns, and candies along with you to munch inside while watching the movie. Some movie tickets come at discounted prices. Check online and you will get to save money on that account too. So, you know now how to save good money while taking your family out to see a movie.

5. Saving at Home

Make everyone in your family participate in making savings wherever they can. Inculcate a habit of turning off the lights when leaving the room. Initially, you or your kids may forget to do so. Fix a fun-punishment for those who break this rule. Water heaters may be run on low settings, if warm water is the need. Higher settings consume more power. If the air outside is cooler, you may open the windows to let in fresh and cool air. This way you can save significantly on your air conditioning. All these little things done consciously can make a huge contribution to your saving.

6. Reward Scheme

Start a reward scheme at home encouraging all your family members to become conscientious savers. Achievers may be rewarded with stuff they want. If you want to avoid expenses on taxis, encourage them to use public transport. The savings that are made on this account can be used to finance different needs of individuals in the family. You may also spend the amount saved on a family outing.

7. Right Attitude

It is important to develop the right attitude towards saving. In fact, the entire family needs to have a healthy view on saving. You need to develop a habit of not wasting resources and being aware of the need of saving. Do not think that you cannot save, because if you make a conscious effort, you certainly can.