I love saving…actually I am a little bit obsessed with it. I know it sounds like I am exaggerating, but I truly become sad when I do not have savings…even for just one month. Some people say that I love money…not really. I love security and knowing that I have a fall-back plan. I got this habit from the situation at home, where saving is not really a thing…so I developed the opposite habit.
My sister on the other hand…not so much.
I realize that the habit of saving up is not easy for everyone, but I believe that it is a skill that can be learnt. So this is a post to share how I do it and how you can implement it in your life.
I am going to break it up into two sections: Technical financial stuff and I will end with Lifestyle changes that you can make.
Technical Financial Stuff
The following tips are changes that you can make to manage your money better. They explain the how of saving.
1. Small savings add up
Start small! I know we are living in a fast paced world where we are all obsessed with getting results as in like now. I am also a victim of this.
For example, if you decide to start working out. And you start by exercising twice a day, doing spinning, aerobics, treadmills and even making those healthy smoothies. Then in a week, you get on that scale, and your weight has barely moved…you get deflated. This is what leads to the burn out.
So save the little that you can, every time that you can and it will all add up. You are not doing it to develop the habit in a short time or to save a pile of money at once. You do it because you know it will add up.
2. Reduce Your Negative Balance
It is very important to tackle your debts as you start your new saving habit.
It is advised that you start with your highest debts. Or start paying off the debt with the highest interest rates. Whichever works for you.
Personally, I focus on paying off the debts that will finish the quickest. Then I can tick it off the list.
Getting rid of debt will also be beneficial when you start saving. Because I get so demotivated when after saving, my net worth is still a negative balance. So reducing the negative balance will hep you see the progress with your journey.
It is always good to separate your savings. Think of them per goal and purpose.
This will determine the type of access to your funds that you will need. And the duration of your saving to reach the target.
If you keep all of your savings in one account and mentally keep track of your different goals, you might not reach them. You will definitely need to take out some money (for whatever reason). Since there is no clear goal for this account, you will focus of your financial goals and likely give up because it seems like there is no point.
Whereas if you don’t have easy access to all of your funds, it will be easier to reach your goals. And money would only go out of your emergency fund (account with the easiest access).
4. Consider The Interest
We have already spoken about the access that you have to your funds. If you are saving for a goal that you will reach in a year, you will benefit from restricting your access to the funds during this time. Most of these portfolios have higher interest rates because of the restrictions you have.
This is why it is important to outline your savings goals, duration and desired target. This will help you choose the right account for your needs.
Shop around and try out different banks to get the best interest deal out there. You don’t need to have all of your accounts in one bank.
5. Build Up Your Cushion
Your cushion fund is your emergency fund. This is the money that will help you out during unexpected events.
This fund is important because it ensures that you don’t deplete all of your savings every time something comes up. This way you won’t lose focus of your goals.
It is recommended that you save up between 3 and 6 months worth of your monthly expenses. Also, this fund should be easy to access to avoid frustrations when you are in a bad situation.
6. First, Pay Yourself
Doesn’t suck when you have all of these people to give your money to every month? Rent to landlord, car installment to bank, and the list goes on. So why not pay yourself first?
This concept is centered around treating your monthly savings as an expense or a form of payment to yourself. This has been found to be one of the most effective ways to save money. In fact, you can ensure your success through this method by setting up a debit order with your bank to ensure that the money is automatically taken from your account monthly.
In addition to actually saving money, there are some lifestyle changes that you can make that will make you successful in your journey. Building this habit is not easy, so implementing these changes will really help.
7. Pay It Out On Pay Day
On pay day, when you pay all of your other expenses, pay out your savings. In fact, I save before paying anything else. This prioritizes your savings and will make it easier to develop the habit of saving.
Your savings should not be an after thought. You don’t need to wait until you have paid for everything before saving. For you to do this, you would need to know the exact amount that you can afford to save. You can find this out by creating a comprehensive budget and sticking to it. Find an easy budget template here.
8. Make It Fun
Yes…you read that correctly. Saving CAN be fun.
There are multiple saving strategies that help you reach your goals without the strain. One of my favorite is the 52 week challenge. There are different forms of the challenge, and you can invest any amount that you can afford.
I like doing it in reserve because at the beginning of the year you are more likely to be more motivated and stick to it. This way, as the year goes I don’t need to stress about it that much because the amounts are less.
9. Refine Your Shopping Skills
Change the way that you shop. Make lists and set limits before going to the shop. Think before each purchase…
do you really need the product?
does it have to be the expensive brand?
This is how I practice impulse control which really decreases my unexpected expenses.
10. Plan and Review
Make a plan of how you will spend your money. This is done through your budget.
But this step is useless unless you review how you managed your money and make improvements as needed.
For example, I discovered that the cash in my purse always disappeared. That is when I found out that I was spending it on useless items that I could not even remember. It added up to around $ 200 monthly. This is money I could add to my savings. So I have since decided that I don’t keep cash in my purse. You can get a solution that will work for you.
11. Don’t Be A Victim of FOMO
Peer pressure and the fear of missing out can really get you out of budget. I know you love your friends but you don’t need to spend like them.
Your situations and responsibilities are different. If you can’t afford something, you should talk to them and they will understand.
The Key is…
- To develop a habit habit of saving, the key things to do is to set clear financial goals, targets and duration. This way you can picture the end goal and you can constantly recognize your purpose for saving.
- Consistency: Saving a habit, a good one at that. So in developing good habits, consistency is key. this ill help your savings group, not how small the amount you save is.
I hope this information will help you start on your saving journey. Please feel free to let me know how it goes in the comments section below, or drop me an email.