5 Ways to Create Huge Savings in Your Budget

With the economy not doing so well, many people are looking for ways to save money and reduce their debt.

While it's great to cut out little things, such as lattes and Gucci bags, what most people need are big savings. You know, thousands of dollars in savings, not $25 a month.

But you can't slash your budget for items such as food, gas and electricity - while you can save some money in these areas, the savings are usually pretty small compared to some of the items below. So I've compiled a list of ways you can make big changes, at least for a little while - and who knows, maybe over the long term.

There will be some objections - from people who don't think they can change their lives this much, or who don't want to. That's fine - I'm not saying these changes are for everyone. However, I really do think we can live with less and with the right mindset, you can find happiness right now, without needing to spend money. That's the key - finding happiness while living with less.

1. Move to a smaller home. For many people, housing is the biggest expense in their budget. Thus it represents the biggest opportunity to save - if you live in a smaller, less costly home, you can save a lot of money on your mortgage payments. This isn't a change you can implement overnight, but it's worth keeping your eye open for an opportunity to make the change. Start looking around for smaller homes, especially ones that are closer to the places you need to go, such as work, the grocery store, etc., so you can save on transportation costs as well. If you get rid of a lot of excess stuff, you don't need as much space. This change alone can save thousands each year.

2. Sell a car. If you have two (or more) vehicles, consider selling one of them to save money. Often we can get away with one vehicle if we carefully arrange our schedules. I know a ot of people who have kids and are able to survive with one car. Sure, sometimes it would be cool to have two cars, but it's not a necessity. Take any cash you get from selling your car and use it to pay off some of the loan for the car you keep - or use it to pay off higher interest debt.

3. Get a smaller, used car. Whether you already have only one car, or you decide you absolutely need two or more vehicles, you can downgrade your car so that it costs less. Sell your car, and look for a smaller, used model that runs well (preferably only 2-3 years old) and costs less than the one you own now. Again, potential savings of thousands of dollars each year.

4. Stop paying interest. Some people pay thousands of dollars in interest every year. The key is to stop getting into new debt, and to pay off your old debt as quickly as possible. Pay off your credit cards as soon as possible.

5. Stop buying unnecessary items. This is a toughie, but if you're really serious about saving, you'll at least consider it. Try tracking your spending for a month, and next to each expense item mark the ones that are pure necessities: groceries, gas, electricity bills, medicine, etc. The rest are unnecessary - clothes and shoes you didn't really need, electronics, magazines, gourmet coffee, etc. If you stopped buying these things, at least for a little while, you'll notice a pretty sizable savings.

With all this extra money you managed to save, you can invest this amount in your retirement account and buy stocks, mutual funds and bonds. These investments can pay you dividends and interest income which will enable your portfolio to grow over the long term. Stop buying stuff you don't really need and instead put your money to good use by buying investment products that will help you retire comfortably.

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