Saving money is a habit and foundation for financial success. Saving is a very simple habit that anyone with discipline can do easily. Savings empowers individuals to handle the uncertainties of life and avoid unwanted debts as well. Let us be your guide to saving.
It is much easier to start saving with purpose. You should define your own saving goals like vacation, education, buying a home and so on. Having these goals provide clarity on what you are working toward. Purpose-driven saving makes it easier to stay disciplined because you have clear reasons to stay on track. This is a great way to start.
On the other hand, saving without a specific purpose is still incredibly valuable. Let’s call this way of saving as open-ended saving. Life will throw unexpected surprises at us. Open-ended saving will act as a financial cushion when surprises/uncertainties occur.
Let me convince you why you should treat saving with importance and prioritize it. As we all know by now, it helps you to handle unexpected expenses like sudden medical cost, car/house repairs or even job loss. Having savings at your bank to handle surprises will give you a peace of mind. Saving will help you to travel wherever you like, start a small business and pursue higher education – it enables a lot of opportunities. Do not forget that savings is the starting point for financial independence and wealth creation. Who does not like to do whatever they love and wherever they want.
The Big question. How to do it?
Try to save at least 20 percent of your income every month. You can save more than that, no one is going to stop you.
Target for a small goal first, may be $1000 or $2000. This amount depends on you income. See how it goes, if you successfully do this then congratulations.Now you can focus on your other financial goals as targets if there are anything like buying a house, vacation or trip.
Save before you spend, not the other way around. If you are a person who is already doing this, then wonderful. Spending on everything and calling whatever left is not saving at all. Don’t be that spend first, save next person – because it’s risky.
The Savings Equation:
Income – Savings = Expenses (Money you can spend)
Whenever you receive your salary or income by other means, try to automate the process of sending 20% or more of it as soon as possible. Then you can spend the rest.
Great way to save more is by cutting down unnecessary expenses. Only unnecessary ones!. Simple way to do this is to sit down for a couple of hours and take a look at your bank statement, card statements, bills for the last three or four months. You will be able to figure out where unnecessary expenses are happening. It can be anything – unused or rarely used subscriptions, higher dining out costs due to frequent dining out.
Be Prepared for the Rainy Day
Saving for the rainy day is very important. We call it the emergency fund. Emergency fund is a specific amount of money that we should save to handle unexpected events like sudden home repairs, car repairs, medical emergencies and job loss.
It is recommended to set aside at least 3 to 6 months’ worth of living expenses as an emergency fund. Remember to keep this fund/savings liquid which can be quickly withdrawn or can be taken to spend when a requirement arises. But do not keep it too accessible where you will get tempted to spend it. Keeping emergency fund as cash at hand is definitely not a good idea. Good options would be to keep the money in a high-yield savings account or money market account.
How to make saving more effective?
Keep your money in a high-yield savings account or money market account. These accounts offer better interest rates than normal savings accounts. You can use mobile apps to track savings and expenses which would make it easier to take a look at everything at the same place. Make good use of programmes offered by employers/governments. Employer-sponsored savings plans, matched contributions, or tax-advantaged accounts if it is available in your country.
Best time to start saving is now. Savings should be your lifelong habit, not a blip. Some of us portray saving as some evil force that would prevent us from enjoying life. This perception is far from the truth. Look at saving as a way to align your spending with your priorities and values.
Savings is not saying no to everything, but saying yes to what’s important to you. Your higher education, dream vacation or trip might be more important to you than spending money on a luxury car. A savings mindset isn’t about sacrifice—it’s about empowerment. You’re buying freedom from stress and panic when unexpected expenses arise.
If it is harder to save 20 percent of your income, then start small. Saving something is better than nothing. Saving 10$ everyday will result in more than 3650$ in savings at the end of the year. This much amount is very helpful to go on a small vacation or to handle small emergencies. So start saving today, don’t wait for tomorrow.
Now you have secured your foundation. Now let us build on the stability to make money work for you. Stay tuned!