Simpleology Blog

Saving money isn't just about making huge lifestyle changes and cutting down on your everyday spending. Sometimes, a minor alteration is all it takes. By recognizing where savings can be made and focusing your attention on particular goals, it's not difficult to make your money go a lot further.

In any case, saving sometimes requires spending first--like when paying off debts or buying things you need.

Given this, here are five ways you can start giving your hard-earned cash a longer life in your possession:

1. Pay off your debts before you save. Your debts are often burdened with high interest rates. Your savings, in contrast, don't usually have such high rates of interest.

So before you go looking at savings, you might as well use your money to pay off your debts. It's best to have a little money stashed away for emergencies (around two to six months of equivalent income is wise), but any extra savings amounts are best used to get rid of your debts.

And the more expensive debts with high interest rates are best paid off before the loans with more competitive rates. For instance, home loans are likely to attract cheaper rates than credit card rates. So, pay off the credit cards before the lower rates of debt.

2. Ask your bank for help...when things are good. Banks don't like to give preferential treatment when you're in trouble, but they're happy to help when you're in a positive position. So don't go asking for loans, better rates, or special perks when you're in dire need of assistance. Instead, plan ahead and see what your bank can do for you when you don't particularly need the help.

With the financial and economic climate as it is, this isn't the best of times for the world's banks. This is why it's crucial for you to present yourself as a happy customer without any pressing issues. Banks should be more willing to listen to your requests if it means hanging on to your money.

3. Haggle everywhere. It doesn't matter what store you're at, you should always try asking for a discount. I went to a chain of bookshops and noticed one of the books I wanted had a slight scratch on the spine. It was the only copy available, so I asked the cashier if any discount was available. He told me he was able to give an instant 10-percent discount, no questions asked. Since I had another couple of books, I suggested 10 percent off all the books would make me a lot happier buying the scratched book. Guess what? I got 10 percent off the lot.

So it's always worth asking. After daring to request a discount a few times, it should become second nature to you. If your request is refused, what have you lost? Nothing!

4. Check the interest rates and best-buy tables for saving accounts. Shopping around for the best savings deals is easy. However, a lot of people still keep their money in an old account with a totally uncompetitive rate. Find out where you can get more interest on your hard-earned savings and deposit the money there instead. Then, if there comes a time when you feel that the account isn't so beneficial anymore, you can deposit your money elsewhere. Check the best buy tables that get published and consult price comparison websites for an idea of the top offers out there.

Even if you don't want to bother moving to a different company or bank, chances are your current financial provider or bank will regularly introduce new accounts. So, look out for any impressive deals they will offer in the future.

5. Make a list of the items you want more than anything else. With a list, it's a lot easier to put yourself off impulse buys. It's likely that you often don't think twice about making an impulse purchase when you have a little cash to spare. You forget that by doing this your money won't go toward the things you REALLY want.

A list of ultimate wants (and their respective prices) can remind you about the things that really matter to you and give you reason to leave that dress on the hook or walk away from the tempting video game.

A few years ago, I was saving for some camera equipment. I wasn't getting very far. So, one month, I worked out how much I'd spent on impulse purchases alone. As it turned out, after one month, it added up to about a quarter of the money I'd been trying to save up!

As soon as I made my list of wants, I realized that my shopping habits changed for the better. Soon after that, saving money was like second nature to me and I was able to afford the camera equipment.

These tips ought to make it clear that saving doesn't just involve building up a long-term nest egg. It also requires you to be wise about spending.

Credits: Photo by Petr Kratochvil, courtesy of Public Domain Pictures.

Suggested Resource: To get smarter at money math, sign up for Simpleology 102: The Simple Science of Money. The first lesson alone, "The Grand Law of Wealth: Increase Your Incomings and Decrease Your Outgoings," is simply priceless.