Believe it or not, saving is essential. You cannot just spend everything you make and expect to have enough money for everything you need.
You need to save money for your future and your family. Even though saving is essential, it is not an easy task.
Today, we are in the midst of weird times where millions of people have either lost their job or cannot find any. This is simple proof that we should, and we need to save money to survive these types of times.
Unprecedented times have proved that there is a reason why saving is essential and comes first. Here are the six most manageable steps to get started:
- Create A Budget
- Reduce Spending
- Increase Your Income
- Make A Savings Account
- Set Goals For Yourself
- Take a 7-Day Pause
- Invest Your Savings
1. Create A Budget
Many people will admit that managing their personal finances is no easy task. I realized that budgeting is essential because it helps you be in charge of the money, rather than the other way around.
Budgets are explained differently by everyone, but it is not as complicated as people make it seem. A budget is simply a way to track how much money is flowing into your bank account, as well as how much is leaving.
We probably don’t want to admit it, but it can be easy to go over your budget. Going over your budget means that you buy more than you can afford.
A budget helps you keep track of your expenses, which allows you to spend your money more wisely. This will make room for more savings, which you could use for that dream vacation, new car, or a night out.
Budgeting is no easy task since it requires perseverance and persistence. While it does take some getting used to, budgeting correctly can pay off huge.
All in all, a budget is crucial as it will help you be more aware of your financial situation, helping you stay out of debt.
2. Reduce Your Spending
Having a budget set up will give you an idea of where you are. If, per se, your income is less than your expenses, that obviously means you are in debt.
One way to get rid of this is to reduce your expenses, which is difficult for people who are compulsive buyers.
To figure out how to reduce your spending, sit down and start looking at all your expenses. This will help you to differentiate your living expenses from the less important.
Bills like rent and utility bills are fixed costs, which will generally be the most considerable and static monthly expense. These are the costs that you probably can’t change very much without a drastic change to your lifestyle.
Look for the other types of expenses that are more of the “nice-to-haves”. Do you really need to pay for that extra subscription box? You need to ask yourself whether you need to be paying a specific expense.
You can only do this with expenses you can control, such as groceries, entertainment, eating out, or your cell phone bill.
Not only will reducing spending decrease the amount of debt, but it will also allow you to save as your income will be greater than your expense.
3. Increase Your Income
On the other side of the budgeting equation opposite saving more is to make more money. The greater your income is, the more that you will be able to save.
Let’s say you are making $5,000 per month at your regular job. If 90% of your income goes to your base expenses, you would be able to save $500 per month.
By increasing your income while keeping your expenses the same, you can put that extra money towards savings. If you can make an extra $100 per month, you’ll be able to increase your overall savings to $600.
So, how do you make some extra money? If you have a full time job and have some extra time, you could look for a part-time job. You could also use your skills to start a side hustle or sells gigs.
4. Set Goals For Yourself
Setting goals for yourself always motivate you to do things you are unless too lazy to act on. This is an important step, and it varies from person to person as everyone has something different to achieve.
However, the most common goal should be to save money by making an emergency fund account or savings account.
Goals motivate you to achieve them, and having all of them in one place makes it easier to remember and track. Some other goals you can include are paying off debt, buying a house or a car, or saving for retirement.
These goals will help you do the math for how much you may need for a new car or a new house. It may vary from person to person.
5. Make A Savings Account
The first thing you should do to start saving is to make a savings account as an emergency fund. It is highly recommended to make a separate account for a savings account. This is because it will make the math more comfortable and prevent you from using up your saved money for the usual spending.
Tip: Another thing you could do is transfer a certain percentage of your money to the said savings account before paying off your expenses.
Having a budget would help you calculate how much you actually need to pay for your necessary expenses. Emergency funds are instrumental, and these unprecedented times is proof of why everyone should have one just in case.
Check out the financial accounts that all couples should have.
6. Take a 7-Day Pause
If you see a cute shirt or something that YOU JUST HAVE TO BUY, well, DON’T. We all waste money on things we don’t use regularly and sometimes regret buying them.
This is why you should enforce a rule on yourself to prevent yourself from buying something you like for at least 7 days. After waiting at least a week, ask yourself the question, do you really want it?
This method sometimes works wonders and brings you back to your senses before buying something you do not really need or want. This will help you to save more and prevents useless spending.
Although this method seems ridiculously stupid, it is not. This method has helped me decrease my expenses by at least 25%. It could be the same for you.
7. Invest Your Savings
This step mostly depends on the goals you have set for yourself. You could start investing your saving for the future. Although investing your savings is intimidating, you could opt for less risky investments. Here are some to begin with:
- High-yield savings account
- Savings bonds
- Certificates of deposit
- Money market funds
- Corporate bonds
- Dividend-paying stocks
However, there are some catches to low-risk investments. One is that inflation can erode the purchasing power (PP) of money and that low-risk investments help you earn lower returns. These will be smart investments if you are thinking about making it now in these unprecedented times.
Conclusion
Saving money does sound very easy, but it takes a lot of planning and determination to make it happen. Simultaneously, although it is hard to figure it out, it will give you fewer things to worry about, reducing stress. In other words, no need to worry about the future anymore.
