The key rule of living in comfort in the future is sound financial management. We found out why it is difficult for people to save? Which saving strategy is the most effective? Which life hacks will help you save money on a regular basis?
What prevents you from saving money?
- The habit of wasting everything. And this is not always a consequence of a modest income. Actually, a high salary does not promise material well-being if a person does not know how to properly manage money and be financially literate. You can save with any income, the main thing is to keep your personal budget correctly;
- Lack of motivation and a clear goal. Saving for a rainy day is a losing strategy. You need to accurately determine the goal and timing. An abstract goal does not fit, our brain does not perceive it. Therefore, we change the incorrect wording “I want to save up for a car” to the correct one: “I want to save up for a blue BMW with automatic transmission and climate control by December 2022”;
- Lack of cost control. If a person does not know how much he or she spends a month on mandatory payments, food and travel, it is impossible to manage money wisely. It is better to write down expenses, clarity gives an understanding of where to save and what can be postponed. There are many mobile applications that will simplify the process and calculate your expenses in different categories, and all you need to do is add all your expenses to the program;
- Life on loan. The habit of borrowing or living on loans is destructive if more than 30% of your income is consumed by interest. For large purchases, sometimes it is really easier to take a payday loan in Woburn MA, or get a credit card. The main thing is to plan correctly;
- Spontaneous spending under the influence of the moment. Impulsive purchases eat up the lion’s share of income. It is important to understand the meaninglessness of unnecessary things and give up unplanned spending;
- Waiver of benefits. Many people do not use the tax deduction for mortgages, medical treatment, education, cashback and discounts, and these are decent sums that can be spent on savings.
How to start saving money in the New Year
Planning and motivation are saving’s best friends. If you have a clear plan, it is easier to move towards the intended goal.
You should act according to the algorithm:
- Set a specific goal: to save up for a ten-day vacation in Paris in a definite hotel;
- Calculate the required amount – for example, $1,500;
- Determine the deadline – for example, by July 2021;
- Calculate how much money you need to be saved monthly to achieve the goal: if you start from December 2020, then putting aside $200 each month, you will collect the required amount by July.
The goal should be achievable without compromising a normal lifestyle: so that you have enough money for food, travel, and other necessary expenses.
Severe restrictions can cause depressed mood and breakdowns. In a state of stress, you will not be able to save funds. Financial planning is about having fun – just like eating right. You will notice the result of a new good habit right away: even if it serves as a motivation.
7 saving tips for beginners
- Start tracking your spending. Calculate how much money you spend on rent, gasoline, food, etc. Keep a small amount in reserve so that you have something to pay for a colleague’s birthday present a school trip for a child;
- Think about what you can avoid or how to cut costs, for example, drinking office coffee instead of cappuccino in a fancy coffee shop, or washing the car in a self-service car wash rather than all-inclusive, etc.;
- Pay utility and other mandatory payments immediately after your paycheck so as not to accumulate debts and penalties. This also applies to savings – it is better to put some funds aside in a special account immediately after receiving income, so as not to go to zero in the final;
- Calculate a budget for daily spending, transfer this amount to a separate card and take only this with you so that you are not tempted to spend more than you can afford;
- If you have a desire to make a spontaneous purchase, take a couple of days to think. Perhaps the desire will disappear during this time;
- Penalize yourself for impulsive purchases: if you cannot resist unplanned spending, put the same amount in a savings account. Double benefit: in case of rash purchases, you will replenish the savings account and form a useful habit to think a hundred times before spending money;
- Refuse loans – do not take new loans, close the old ones as quickly as possible.
If you can’t save money, ask yourself if you really need the thing for which you are saving money. You may just reconsider the goal.
3 techniques to help you save money
This is one of the most popular saving methods, which was described by T. Harv Eker in the book “Think Like a Millionaire.”
The bottom line: after receiving income, distribute the money in six “jars” (envelopes) in a certain proportion. Each jar is responsible for a specific goal, and you can spend this money only on it:
- 1 jar – 55% of income for monthly expenses (food, travel, utilities, everyday life);
- 2 jar – 10% of income for entertainment and leisure (cafes, cinema, theater, etc.);
- 3 jar – 10% of investment income in order to create passive income (stocks, bonds);
- 4 jar – 10% of income for education, courses, trainings, master classes for yourself and children;
- 5 jar – 10% of the income for the financial airbag and large purchases, for example, a refrigerator, a car, vacation vouchers;
- 6 jar – 5% of income for gifts and charity.
This method assumes daily rounding of the card balance downwards and sending the excess to the savings account. Let’s say that at the end of the day you have $567 on your card, you send $67 to savings. Or $7, if saving $67 in a piggy bank every day is too burdensome for you.
If you are more comfortable using cash, create a daily ritual to take out change from your pockets and put it in a piggy bank. By the end of the year, you will save a decent amount.
“Piggy bank” in the banking app
Almost all banks offer the “piggy bank” function to create savings automatically. You can choose one of the following methods:
- crediting a fixed amount: you set the date, frequency and amount of transfers yourself, for example, on the 15th of each month, $30 will be debited;
- upon receipt of money: transfer of a certain percentage of the receipts to the card, for example, 5%;
- on the fact of expenses: transfer of a certain percentage of the daily expenses is a convenient option for those who cannot resist unplanned expenses.
The “piggy bank” is connected quickly, the amount of savings is reported in SMS. Also, you can use a savings account as a “money box”. For savings, the bank will also charge you interest – another advantage in your savings bank. And it is convenient to manage finances online – in a mobile app.