Savings can make or break your financial stability. However, while saving money is a piece of financial advice that many people believe in, only a fraction of the total population practice it. Some people are blocked by not knowing where or how to start saving or by not having enough money to begin saving.
The truth is the hardest thing about setting aside a few dollars is getting started. Let’s talk about ways to start saving money to protect your financial future.
How Much Money Should You Set Aside?
Personal finance experts tend to advise setting aside 20 percent of your monthly income for savings. While this is ideal, not everyone has the same goals, financial situation, or priorities.
Maybe a better approach when figuring out how much you should save is by determining your goals for saving. For example, if you want to build an emergency fund, you should think about how much you can save in a year to cover at least six months of your living expenses.
On the other hand, if you’re saving up for short to medium term goals like traveling, getting married, or making a big purchase then it’s important to set your target savings amount as well as a deadline. This way, you can divide the amount by the number of months remaining before the deadline to determine your monthly savings requirements to meet your goals.
Finally, if you’re saving up for your retirement, financial experts advise that you set aside 10 to 15 percent of your income.
Best Ways to Start Saving Money
Set a Goal
As with anything worth doing, it’s important to have a goal. Identify why you’re saving money. Whether you want to save up for a European tour, you want to build an emergency fund, or you want to start with your retirement fund, having a clear goal helps to keep you motivated at all times.
Open a Separate Account for Savings
Having a separate bank account specifically for savings means you’ll have fewer chances of using your savings for other things.
Keep Track of Your Expenses
Before you can start saving money, you need to figure out how much you’re spending. List everything you spend money on. This includes gas, groceries, bills, mortgage, even your morning lattes.
When you really know what you’re spending your money on, it’s easier to figure out where you can cut back.
Establish a Budget
When we talk about ways to start saving money, most people star with a budget. Budgeting is the cornerstone of personal financial management and saving. It not only stops you from overspending but it also lets you gain a sense of control over your income. These days, there are many tools and apps that can help set a monthly budget but if you’re more of a traditionalist, you can opt for a simple pen and paper approach.
Avoid Temptations and Instant Gratification
If you’re an impulse buyer, you’re going to have to rein yourself in a bit if you want to start saving money. Avoid malls and sales, make homemade meals, or make your own coffee if you can so you don’t spend on unnecessary items.
Also, instead of buying things to make yourself feel better when you’re stressed, go for hobbies like working out, meditating, reading, or napping.
Make Shopping Lists and Stick to Them
Before heading to the store to pick up groceries, write down everything you need to buy. More importantly, stick to it and avoid unplanned purchases.
Do a Price Comparison
We all know that stores price differently for the same items. If you want to reel in real savings, check the price points at several stores and shop where they’re cheapest.
Take the DIY Route When You Can
A lot of things you tend to buy at the store can easily be made at home. This includes coffee, meals, bread, and even household cleaning products. Not only are these cheaper to make but they are also often healthier for you.
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Be on the Lookout for Coupons and Discounts
Coupons and discount codes are an excellent way to save money. There are apps and websites that offer coupons you can use both online and in stores.
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Try Off Brand Items
Name brand items tend to be more expensive than generic versions. However, they’re not necessarily better. When you can, opt for off-brand items. They cost less and are pretty much the same as the branded stuff.
The Importance of Saving Money
Just knowing you need to save is often not enough. If you want to be successful at saving money, you need to understand why this practice is so important.
First, saving money can give you flexibility and freedom in the future. While it may not look like it now, having funds set aside allows you to do more things down the line. You can buy your dream car or travel for months without being tied down to a paycheck.
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Second, saving provides you with financial security. Financial emergencies can happen to anyone. You or a family member could get sick or your refrigerator can break down. When times like this happen, having savings lets you have funds for unexpected expenses and emergencies.
Third, having savings allows you to explore new opportunities. Think about this, when you have money saved up in your bank account, you will be able to take more calculated risks. You can pursue your passions like starting your own business. It opens up your world to greater prospects that can change yours and your family’s lives for good.
Saving money lets you enjoy greater security in life. All you need to do is to get started.
Do you have ways to start saving money you’d like to share? Let me know in the comments below!