There are Countless reasons might be, not to Save money at our 20’s or 30’s. Lifestyle upgrades, living in the moment and crippling debt are just some of them. The truth is that a lot of us know the fact that saving is essential for survival, but only a few people put their money where their mouth is.
“Many folks think they aren’t good at earning money, when what they don’t know is how to use it.” —Frank A. Clark
If you are a novice at the art of saving money, here are some methods you might want to try to start saving Money.
#Record Your Expenses
Keep a tight budget is a must for everyone looking to save money, but if you do not track the expenses, you may find that it’s difficult to stick to your goals. Keeping a monthly Notebook to pen down all the daily expenses can help you identify the problem areas and adjust your spending habits to fit your budget.
One tip is to focus in on your Discretionary expenses (Restaurant, coffee, clothes, fitness club, etc.) and see if there are ways to cut down some expenses. For instance, instead of eating out for a lunch every day at work at 10$ a meal, it may make more sense to bring our lunch from home and enjoy a meal out with friends for 30$ on Friday nights.
- It can be handy to keep a small notebook with you all the times. Get in the habit of recording all the expenses, track it every penny spent which could be avoided in that month.
- Note that, today, there are many apps you can download to your phone that can help you keep track of your expenses (some of which are free), I personally use ETMONEY APP, that helps to track my personal expenses and notify me every dime which I spent from my debit card or bank account.
You may be shocked how much money you spend on purchases that are far from essential.
#Decide on your Priorities to Save Money
After your expenses and Income, decide your priorities and divide it in short-term or long-term goals. Your goals are likely to have the bigger impact on how you Save Money. It’s important that planning for Retirement does not back seat to short-term needs.
Prioritizing the goals can give your clear indication how and when to start Saving. For example, if you are going to purchase a Car in future, you could start putting Money away for one.
#Start saving as early as possible
Investing, as with anything in life benefits from an early start. The earlier you begin planning to invest, it will always be better to have potential returns on your investment. By taking advantage of your youth, you can get a head start for your Future. Here are the reasons to start sooner than later.
- Typically, when it comes to investing, ventures that are more volatile yields the highest return on investment. Investors, who have the time to recover if something were to wrong, have the opportunity to make a riskier move on their money.
- Compound interest really makes a difference, Savvy investors understand the benefits of investing early and taking advantage of the potential gains from compound interest, which you may earn on your money if you start early to save.
- Investing early allows developing disciplined habits by focusing on your budget and cutting expenses when it is needed. The main objective here is to earn money by saving money.
#10% Saving Formula from your Salary
Everyone always wants to know the magic number to save. Is it a Fixed Amount? Or Is it a percentage of your income?
The answer! That depends
There is not one magic number for everyone. Everyone situation is different. Everyone comfort level is different. Some people feel less money in the bank to feel comfortable and some people want to have a big amount of money in their bank account. Take a minute and figure out your number to save, you are comfortable with.
If you have a debt on your shoulder then surely you would not be able to save more, your main priority would be to cut down your debt first. If you are earning less than you might not be able to save more until you start making more.
What I thought, you should start at least 10% of your income and increases it up to 25% as your pay increases.
Is it surprising? Not particularly as if, we see the trending pattern of spends these days, and wants that became the necessity now.
However, it is not a good sign for the future and not a good habit to be teaching to future generations.
So, what can you do? Here’s one the best way to handle, as it is beautifully illustrated by Mr. Spencer Powell How Much of My Paycheck Should I Save?
Let’s say you are earning 40,000$, so try to save 10% of that 4000$ and as your income raises increase your saving as well like you got a raise for 5000$ to 45000$ then save 2500$ and rest raised the amount to add it into yours spends like eating out , movies, or shopping.
Now you are saving 4000$+2500$=6500$, that is 14% of your income
Another raise to 50,000$? Save 2500$ more. Now you are saving 18% of your income. This method allows you to increase your savings and spends for lifestyle using the balanced approach. It allows you to take advantage of raises on both the sides of the coin: Savings and Spending.
#Consolidate Your Debt and Save money
If you are in a Negative zone on credit side, repaying the money you owe as quickly as possible can save you big. The longer you carry a balance of your credit card and loan amount, the more interest you’ll rack up on your debt. One way of speeding up the process of repayment is Debt consolidation. Consolidating the balances of your credit cards and loans into single amount can help you to obtain a lower interest rate, which will help you to save money over time. It will simplify your debt repayment, making it easier to get a handle on what you owe.
We outline some strategies that can help you to manage the debt situations without stressing your Wallet or could help you to Start Saving from your Own Debt
- First step is to prioritize the repayment of your loans. Make the list of all the outstanding loans & Credit cards and start with the repayment of high interest or Costliest loans. First, tackle the loan which is making a hole in your pocket. Pay the maximum amount that you can pay against the costliest loan without jeopardizing the repayment of other loans. Once you have cleared the costliest loan then move into next one.
- One simple way to repay your loan faster to bump up the Loan EMI as your Income increases, if your income rises to let’s say 8% then you can easily increase your EMI by 5%. Don’t underestimate the impact of the modest increase. It may reduce the tenure of repayment and could save your money as interest from Debt.
- Received a Fat Bonus? Do not splurge on New smartphone or New plasma TV. Use the money to repayment of your debt aggressively. If you are receiving a big amount of money from maturity proceeds from Policy, Mutual Funds, Income tax refunds, should be used to pay your debt like credit card outstanding amount or personal Loans First. If you are likely to incur a penalty, compare the cost with the interest saved if you prepay the loan.
#Make Saving Automatic
All the banks offer Automated transfer between your Saving account and Fixed deposit, you can choose when, how much transfer money to. Automated transfer or Sweep In option is a great way to save money since you don’t have to think about it and it generally reduces the temptation to spend the money instead.
Here I have outlined the Basic Methods to start saving money, which I religiously follow. However, if I shop around and go for online shopping, I prefer first to research on How can I save some money in that product? discount coupons! cashback websites! Negotiation with a shopkeeper, always carry a list of items which I intend to purchase …. blah! blah blah! that helped me to save some pennies on my Final bills.
And always keep this one thing in your Mind.
” Save Money and Money will Save You “
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