The basic rule on how to save money is to always spend less than the amount being earned. That is simple arithmetic: total amount of expenses for the time being subtracted from the gross income for that period is savings. Although this is a very simple formula, it is also very easy to fail every time expenditures exceed earnings no matter how much income is earned. To keep the books balanced, a detailed list of all the expenses made must be kept so that it is always on check. Learning to cut down on unnecessary expenditures is the key to controlling and limiting costs.
Prioritize repayment of debts and obligations
Debts and obligations get additional interests every time payments are done late. Interest due to delay of payments is one of the most useless expense one has to make. If using the credit card is unavoidable, then at least prioritize punctual repayments of monthly fees. Fixed monthly obligations like housing loans and car loans must be cleared out first in the personal checkbook.
Set money-saving goals
The part of the income that goes into savings largely depends on the goals set for the future. Ambitious long-term goals on savings are difficult to track so it is always better to set several short-term goals which are more realizable and easier to follow. These short goals must then be planned carefully to contribute to more ambitious long-term savings goals. Short-term goals as easy as setting aside 15% of the monthly income and reserving 5% of the total savings at the end of the year for long-term retirement plans are more effective money-saving strategies than never to have planned and saved at all.
Record and trim down expenses
Writing down all the expenses made everyday and analyzing these at the end of the month greatly help in trimming down unnecessary expenses. Though it is difficult to diligently record money spent everyday, it can be easily done by jotting down notes on the phone or anywhere convenient. Other smart phones even have applications to keep track of daily spending. Cost-cutting can be easily implemented on regular monthly expenses like haircut, weekend trips, and groceries.
These are the most important strategies on how to save money effectively. Letting the savings grow is another aspect one might be interested to venture into since the actual value of cash deposits may be lost in the long run due to inflation.