It is so important to save funds. The future is unpredictable and inasmuch as we want to remain optimistic, we also want to remember nothing about the future is guaranteed. The money you save actually is yours and will help you significantly whenever you find yourself in a needy situation. For instance, emergencies often strike at the time least expected. And by the way, it wouldn’t be an emergency if you had a note and expect it to come.
Why You Need to Save
When faced with an urgent need for funds, where can you turn? Well, you can get to your savings account and finance the condition. What if you have not saved? Still, loans can come handy. But is that the best way to go? Not always! A loan is an obligation and can turn out to be very expensive, especially when the funds are urgently needed.
What if you are in dire need of funds and your application is turned down? In order to be approved for a loan, there are so many things that money lenders like Bugis Credit asses, including your debt-to- income ratio and credit score. It’s discouraging when you are denied a loan in the hour of need. So, save for emergencies.
But again, there is another important reason why you need to save funds. As the years go by, you approach retirement. Saving for retirement will help you live the best kind of life while not working, or perhaps when you become less productive. You don’t have to be a burden to your family once you retire. Even those who thought they would live just for a few years after retirement have been proven wrong. The increase in life expectancy means you are more likely to live much longer after retirement than previously anticipated.
How can you be successful at saving? Well, let us discuss some basic strategies that can help you get better at saving.
How to Get Better at Saving
The ability to save is a gift you may not have. Generally, there are two categories of individuals. We have those who are best saving. Whenever they receive their paycheck, they remember to first save something before spending. These individuals try to restrict themselves to their budget. The other category is that of individuals are not gifted and saving and find it really difficult to save. If you’re in the latter category, the following tips will help you get better at saving:
Set a realistic budget and follow it
You need to plan for your spending, and the best way to do that is by drafting a budget and following it. How do you come up with a good budget? First, determine your monthly take-home pay. This is the money you earn after taxation. Once you determine this figure, list all monthly expenses and divide them into fixed and variable. Fixed expenses are those ones that you incur every month, such as housing.
Variable expenses vary, and may include things like transportation costs. After categorizing your expenses, use the 50/30/20 rule to allocate funds. These values represent the percentage your take-home income that should be devoted to fixed expenses, variable costs, and savings respectively. The fixed costs are the most important and should take a maximum of 50% of your income. Variable costs such as groceries and transportation should not exceed 30% of your income. The remaining 20% should go to your savings account. The following suggestions will help you follow the budget you just set:
- Apportion the variable costs into components, assigning each one of them an amount you project to spend.
- Be realistic in your allocation. Do not be too frugal or too extravagant. For instance, if your budget says you need $40 for entertainment every month and you discover you often use $120, you are not being realistic in your allocation. In this case, it would be wise to increase the allocation, perhaps to $80, and try to limit yourself to that amount.
- Surround yourself with friends who respect your budget. As they say, bad company ruins useful habits
Set saving goals and reward yourself once you attain them
Having some saving goals will motivate you to save every extra dollar you gain. This also means you need to know what you are actually saving for.
Consider paying yourself
You can make an arrangement to always deduct a certain amount from your monthly income and put that into your savings account. Not that this is different from the 20% we talked about earlier. It just ensures that you will actually save, and not spend that 20% as things come up during the month.
I know how difficult it can be to settle debts, especially in a situation where you have accumulated too much. But trust me, if you want to be good at saving, you must consider paying off your debt. Why? Because you will be able to save a lot from interest payments. Therefore, list all your debts and determine the most effective way of settling them. You may consider attacking the high-interest debt first in order to save yourself from interest payment. Alternatively, you can start with your smallest loans, in order to gain momentum and the motivation to continue to pay the remaining ones.
Avoid poor spending habits
We earlier mentioned that you need to follow your budget as closely as possible. What happens when you come across a very attractive product, and it is not in your budget? Well, the best way is to convince yourself it is not the right time for you to have it and walk away. How much do you spend on unnecessary things such as smoking or alcohol? What if you make your morning cup of coffee at home, rather than going to Starbucks? Think of how much you can save by carrying your lunch to work rather than buying food at a restaurant! While it may be so hard to break free from these habits, you can become successful if you stay focused.
The Bottom Line
As mentioned at the outset, saving can be easy for some people and difficult for others. Endeavor to use the tips we have discussed here and you will be smart at saving.
There are those who spend more than they earn and end up always living in debt. In fact, they borrow much more than they can afford and struggle to even make the monthly payments. Do not get yourself into this condition. Planning your spending will help you remain financially healthy.