Best Ways To Start Saving Money
Well, don't we all just love money? It makes life so much easier and colorful. There’s also the fact that when we have a good amount of cash, we effortlessly look and feel good. Now, although money is great to have, you should understand that it seldom lines the pockets of those who don't understand how it works. In essence, you have to be well-acquainted with the psychology of wealth to boost your net worth.
In line with the above, two pillars of wealth creation are saving and investing. Ninety-nine percent of the time, saving precedes investment. It is the bedrock of investment strategies. With that said, right here we won't be giving investment tips. We would instead be showing you the best ways for you to start saving money.
Warning: Saving can mean you depriving yourself of that mocha latte that costs $4 or you sometimes saying no to a spa day and things you love but are not necessary for your existence.
Going on, before we give you saving tips, let's show you a few benefits of saving.
Benefits Of Saving.
- It Makes Retirement Comfortable:
Well, if you believe money gotten from pension would give you the best life when you retire, you need to think again. On a regular basis, inflation hits the economy and the only thing that can help you rebel against it is an amazing stash of money. So, imagine if you save $10 every day, in a year you would have $3,650. Now, if you have about seven years to retirement, you would retire with an accumulated savings of $25,550. Add that to your pension, and you would have an impressive sum that will give you a pretty amazing life after retirement.
- It's Useful During Emergencies:
While life can be beautiful, we can't ignore the fact that it can spring the most unfriendly surprises on anyone and at any time. So, it's best to stay prepared. You can save up some money daily, weekly or monthly and tag its emergency funds. This would be useful for situations such as paying for medical treatment in case you or a loved one falls sick, repairing your car if it breaks down, or taking care of your needs if you lose your job.
- It Helps You To Plan A Vacation:
If you're going to work hard, then you deserve to play hard sometimes. Which better way is there to relax than treating yourself to a vacation at exotic locations such as Miami and Paris which is also known as the city of love? If you can't exactly travel out of your country of domicile due to cost, you can decide to minimize expenses by opting for a weekend getaway to an exotic resort within your city.
In line with the above, irrespective of what you would love to do, one thing is sure. You would need enough funds to handle, accommodation, feeding, and doing all the fun things on your bucket list for your vacation. Here's where saving comes in handy. So, go on and start saving some money today for the treatment that you deserve.
- It Is Useful For Making Investment And Attaining Financial Freedom.
Living from one salary to another can be frustrating on a lot of levels especially when you have bills to take care of, a family to feed, a car to service, a mortgage to pay and projects to handle. This is where saving comes in. It helps you change all that. When you've been able to save a substantial sum of money, it becomes a lot easier to invest in an investment scheme that offers reasonable returns. So, your money won't just sit in the bank, it will grow and if you choose, you can use your savings to start a business or businesses. This would offer you the financial freedom that you've always hoped for.
- It Eliminates Debt.
One thing is for sure. Saving is an incredibly useful way to avoid debt. During the times you need to purchase an expensive product or service, you won’t have to swipe your credit card and consequently reduce your credit score. You can simply deduct the cash from your savings. This not only saves you the horrible experience of having creditors harassing you with calls, and possibly contacting a collection agency. It also helps you avoid the unfair interests that accompany the payback of loans. What's more, if the money you separated as emergency funds is substantial, then you won't need to borrow to handle unpleasant emergencies.
Having laid that out, let’s look at the best ways to start saving money.
Best Ways To Start Saving Money.
- Give Yourself A Reason To Save:
If you desire to cut down on your spending and save a few dollars regularly, then you should understand that nothing would motivate you towards successfully saving, better than you giving yourself a fantastic reason to save. The purpose of a thing always defines its success. So, go on and draw up a savings plan and picture the reason that sponsors your decision to minimize your expenses.
Flowing from the above, let's paint a picture. If for instance, you have a long term goal to own a multi-million dollar company in ten years and you’re currently on a salary of $50,000 monthly, if you save fifty percent of your earnings per month, you should have $3,000,000. If you decide to be saving and investing at ten percent returns annually, you would end up with 3,300,000 by the end of ten years. That would be just perfect for starting up a company and creating for yourself a good life.
Going on, when giving yourself reasons to safe, you should separate short term goals from long-term goals. This would help make you more disciplined in your course.
- Go On A Staycation.
We're sure that you know how people pay thousands of dollars on air tickets to other countries in the name of going on a vacation and needing to unwind. Well, you don't have to spend so much to have yourself a good time. Now, we're not condemning those who save for a vacation. We are saying that if you simply can't afford to spend so much on spoiling yourself, then you can manage your finances by going on a staycation. Look for resorts and fun places close to home. If you can't buy an expensive air ticket to the destination, you can opt for a road trip. Hit the road with great music playing from your car stereo. If you like, you can even stop briefly in beautiful places for some sightseeing. In essence, you don't have to spend much to have fun.
- Pay Up Your Debt.
If you are dealing with debts such as student loans, personal loans, credit card debts, and mortgage, you shouldn't attempt saving until you've paid up your debt. Here’s why. Irrespective of the efforts you put into saving, the repayment of your debts and the interests on them would always take a large chunk of whatever you manage to save. So, focus on eliminating all of your debts. Then, you would be able to save without stress.
- Keep Tabs On Your Expenses And Have A Budget.
For this point, you would need to pen down all the things you spend on monthly and yearly. This would help you have a good understanding of how bad or tolerable your spending habits are. When you know how much you spend on unimportant things, you will be able to ascertain what exactly needs to be taken off your list of expenses. Consequently, you will be equipped to come up with a pretty good budget.
Going on, your budget should weigh your expenses against your income and should have a daily spending limit. When drafting your budget, set aside some money for important and regular things like car maintenance, and health care check-up.
- Pay Yourself First.
Firstly, paying yourself does not mean you treating yourself to luxuries like a car, a house or traveling to an exotic location. Buying a house translates to you paying the bank through mortgages, traveling to an exotic place, is you paying the airlines through tickets, and you getting a car, of course, means you paying the car dealers and your mechanics who would need to service your ride regularly.
When we say to pay yourself first, we mean that you should remove a certain amount from your checking account every payday and then deposit the money in your savings account. Do it religiously and soon enough you will be rolling in some feel-good cash. Fortunately, to make paying yourself easy, lots of banks offer automated transfer services.
- Pack Your Lunch.
To you, this might seem petty, however, think of it. If buying lunch costs you about ten dollars daily and packing it from home costs just two to three dollars, then over a year, if you decide to start packing your lunch from home, you would have successfully saved $2,555. We're sure you never thought eating out costs that much.
- Select the Right Tools.
Due to the number of people that are making the decision to spend less and save more towards their goals, there are tons of financial tools that are now available to provide assistance. For your short term goals, you can save in an FDIC insured savings account, or you can use a certificate of deposit. It works like a savings account except for the fact that your money will be locked down for a specific period and the rate is more beneficial than regular savings accounts.
For your long-term goals, such as retirement, you can use an Individual Retirement Account (IRA) which is insured by FDIC. One of the impressive advantages of IRAs is that they are tax-efficient. This means that your tax liabilities would be minimized as you take financial decisions. You can also purchase securities such as mutual funds and stocks. These securities are offered by broker-dealers. Furthermore, you should understand that they are not backed by FDIC insurance, and they are not guaranteed by any bank. This means that they are high-risk investments and if you choose to have an investment account with them, you might make high returns or you might lose your principal.
Lastly, when picking the right tool, you don’t have to stick to one investment account. You can diversify your portfolio by analyzing all of your options. Check for things like the minimum amount, interest rates, security and duration for the maturity of the investments. When you've done that, you can go on to make the best decisions.
- Quit Smoking.
This is just one of the many habits that appears cheap on the surface but actually costs you a lot. Smoking a pack and a half of cigarettes daily would lead to you spending an average of $3,000 per annul. That's a lot of money that could have been used to sponsor a short term or a long-term goal.
- Save Up On Utilities.
Okay, we know that utilities are necessities. However, if we are to be truthful to ourselves, we would agree that utility costs hardly ever go down. Despite this, there is a way to minimize these costs. If for instance, you opt for a tankless water heater in the place of a water heater with a standard storage tank, you would be reducing utility cost by thirty percent.
Summarily, saving starts with a decision to minimize spending for the purpose of financing a goal. While it may come with a lot of benefits, it's not exactly the easiest thing to do. However to help you make your saving decision a success, discussed above are the benefits of saving and the best tips for saving.
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