@FIN.IQ242
5 Tips to Save Money
Saving money seems like a simple
concept. However, few really understand how to be an effective saver. It’s more
than just putting some money aside for a long-term goal or for a rainy day.
Being an effective saver requires a strategy. If you are unsure of how
effectively you’ve been saving, here are some tips to help you.
1. Pay
yourself first. The mistake some savers make is saving based on what is
left after they’ve paid bills and other expenses. The problem with this
approach is that there will always be something you can spend your money on
which can reduce what you have left to save. So, before you spend any of your
income, take out the portion you’ve allocated for your savings as your first
priority. Experts recommend that minimum of 10% of your income should be
allocated to savings. However, how much you save depends on your income and
expenses.
2. Track
your expenses then create a budget. Most
people have little difficulty creating a budget. Less people stick to them. The
key is to set a realistic budget. But before you do, spend some time tracking
your expenses. Learn exactly how much you spend and where. You need to know
where your money is going so that you know where you can adjust. This way you
can set realistic budgetary targets in line with your spending habits making it
easier for you to stick to your budget.
3. Express
your money as percentages. This is a useful way to plan out your budget. All
this means is that you break down your expenses as percentages of your income.
A popular tip is the 50/30/20 rule. This means that 50% of your income is
allocated to your needs – your living expenses and essentials. 30% should be
allocated to your wants, like dining out or vacations and 20% should go to your
savings. This is one of the rules of
money. If you want to see all of the rules, click here.
4. Control
lifestyle inflation. This is a step often overlooked when saving. Lifestyle
inflation is simply spending more as your income increases. While it may be
tempting to change your lifestyle to reflect your increased income, it is
important that you keep this under control. You should be careful to continue
to prioritize your savings and even increase them when start earning more.
Continue to track your expenses to ensure that your extra income is also
working toward your financial goals.
5. Save
to enjoy life. Savings should always
be to improve your life in some way. Staying focused on this goal will help you
stay on track. While you are thinking toward your end goal, however, remember
that the process to get there shouldn’t be overly stressful. You should be
enjoying life every step of the way and not only when you reach your end goal.
If you find that your current savings plan is too burdensome, you may need to
adjust it. Speak with a financial advisor to help you develop a workable plan.
NOTE:
Savings is not the goal. You should be looking to maximize your savings and a keyway
to maximize your savings is to invest it. Traditional savings
accounts like bank deposits generally pay low interest. You can earn more if
you invest in vehicles like stocks, bonds, and equities. Making this part of
your financial plan will help you earn more on your savings and help you meet
your long-term financial goals.
Learning to be an effective saver
is not just about putting money aside. It’s about creating and activating a
sound financial plan. Following these steps will help you not only become a
better saver but also help you put your money to work.
Free game 🙌🏾
ReplyDelete