Saving money might not come easily or sound good to you, but it’s essential for personal finance management. It’s also necessary for your future and crucial for your financial health. It’s why you need to start saving money early. But then, you might be skeptical about it that you’re thinking it’s impossible to achieve. However, it’s not often the case because everyone can save some — with the willingness to start and stick to it on a regular basis. After all, it doesn’t have to be a big amount of money but even 1% of your monthly income is a great place to start.
1. Think about and set achievable goals
Just think about this. Do you have plans of buying a new car? Are you thinking about marrying your partner soon? These milestone expenses can be enough motivation to think about savings and starting it now.
These things can keep you excited about your savings; hence, you can monitor your budget and strive to set aside a savings fund.
In short, think about the things you want to save for, such as a dream vacation or a retirement saving. List them down, and then determine the amount of money needed to achieve a specific goal. Also, figure out how long do you need to save for this goal.
Short-term goals include a down payment for a car, while a long-term goal can include down payment on a new home.
However, you must set realistic and achievable short-term goals, such as buying a reward for yourself if you did well on getting on the habit of saving. After all, you deserve this psychological boost.
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If you have a child that you want to save for his education, you should put money in an investment account, which can create a growth opportunity when the market grows. However, do note that investment is with risk, too, and that you can lose money. Determine your risk appetite, and figure out if investing is a good choice for you.
Other people also have several bank accounts meant for different goals, such as saving for a home down payment or buying a car. You can do the same to ensure that you’re setting aside a fund for each goal.
2. Know your priorities
What are your top priorities? How you allocate savings also has to do with your goals just as mentioned earlier.
For a start, you should have a clear idea of where to start. For example, if you’re planning to buy a new car, it is wise to start saving for it now little by little. You can also think about your long-term goals, such as planning for a retirement that shouldn’t be left behind when getting into the habit of saving more money.
3. Cut back unnecessary spending
How much do you spend on eating out monthly? How much do you spend on coffee breaks every day? If you would do the math, the cost can easily add up, and you will notice how these things are eating a chunk of your monthly budget.
That money could have been saved, or at least a part of it. You can consider limiting the frequency of eating out and instead bringing pack lunch at work.
Those things we buy out of convenience are more likely overpriced if you’ve not considered that yet. We can find cheaper ways on how to satisfy our cravings like cooking at home where we can prepare our snacks other than buying at the convenience store. It’s cheaper.
Cut back on expenses if they’re hindering you from saving money. Check for non-essential items to reduce or eliminate. A few other tips include –
· Look for low-cost events to reduce spending on entertainment.
· Avoid impulsive buying and postpone a non-essential purchase. Besides, you might not really want to buy that item after a month has passed.
· Cancel the memberships that you’re not using.
· Commit to limit eating out once a month.
4. Monitor your expenses
Create a spreadsheet to keep track of your spending. What are those things/items you usually buy or spend on and how much do they cost? List down everything, including household items, coffee breaks, etc. Organize the entries by categories, such as mortgage, groceries and miscellaneous expenses, to name some. Don’t forget to total each.
Alternatively, you can also use a spending tracker that can automate your spending. It works by categorizing all your transactions to keep track of your budget easily.
5. Set aside a budget for savings
If you already have an idea of your monthly spending, you can organize your records into a budget, which will help you keep track of expenses to your income. With it, you can plan your spending ahead and avoid overspending. When done, try hard to save between 10 and 15 percent of your monthly income, if possible.
6. Separate accounts
Have a separate account for fixed expenses, variable expenses, investments and savings. In this case, you can ensure that you’re withdrawing only from an account meant for that purpose.
Also, separate your business account if you’re an entrepreneur so that you can monitor your money and avoid spending your personal money on business-related purposes.
In addition, you can grow your money better in this way. For example, automating and separating your investment account will prevent you from spending that money for shopping and other expenses. For that, you also avoid the temptation of buying non-essentials.
7. Automate your savings
For personal finance, one of the best ways to save money is to automate savings, allowing you to choose the amount and the time to transfer money. You can also choose an option to split the direct deposit so that a part of your income will go into the savings account.
They are simple money saving techniques that let you save without even noticing you are. Using automated deposits, you can also limit your spending because of the self-discipline it helps you develop.
Speaking of automation, you can also think of automating deposits to at least one account. It is one of the easiest ways on how to reach your money goals faster. Using this technique, you can automatically allot funds for a regular investment account, savings account, and a retirement account. With it, you can also have peace of mind that you’re saving for short- or long-term goals even without having to think about it.
Don’t forget to monitor your progress! Review and see how you’re doing regularly for a little boost in motivation. You should also review your budget so that you can identify and fix issues immediately. Also, you must stick to your savings plan for inspiration on how to save more so that you can achieve your goals faster.
8. Choose the right tools
You can use tools, such as deposit accounts or certificates of deposit. The latter locks your money in for a specific time at an interest rate higher than a savings account can offer.
For long-term goals, you can think about using retirement accounts. On the other hand, some people go for mutual funds, stocks and securities. These are investment products that you can avail through investment accounts.
However, if you’re thinking about securities, note that they’re not insured by the FDIC. They’re not also guaranteed by a bank or aren’t considered deposits. Thus, they’re subject to risks or loss of principal.
As a tip, you can diversify your portfolio, mix the tools to help you save, and consider aspects like interest rates and fees.
9. It’s time to celebrate…
Celebrate your little successes! Feel grateful even for small savings. It’s better than not saving at all. Don’t discount your efforts, such limiting your coffees and eating out or cutting back on memberships and other unnecessary expenses, and give yourself a little reward, be it coffee or a new dress.
Now, if you’re unsure of how much to save, you can start just saving 1% of your monthly income. Each month, you can try to increase that as you progress. Finally, set realistic goals so that they’re easy to stick to for a long time. Get into the habit of saving more money today.
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