Everyone can learn to save and understand how to save money correctly. To do this, you need to know and follow a few basic rules of financial literacy.
Some people believe that savings limit freedom and make you give up something important. In fact, the constant satisfaction of immediate desires can harm your financial situation.
It can be difficult to save without a goal and motivation, so first of all, understand why you need to save.
Set aside a certain amount of money from each cash inflow first, and only then distribute the rest.
It’s widely accepted advice to put aside 10-15% of your income every month to save money quickly. You can start with less. If you spend all your earnings on living, 10% may be too much. In this case, train yourself to save without reducing your standard of living, even with a modest income.
Start with 1-5% of your paycheck; it should be easy to save money to form a habit. Gradually increase the amount. With each increase in salary, save more. From bonuses and the sale of property, you can transfer 30 to 50% of the amount received to a savings account.
To understand how to save money, you need to figure out how you spend it.
● Start writing down your expenses, considering even minor purchases. Keep a record of your spending by category, for example: groceries, transportation, utilities, and entertainment. Even if you spend about $20 a month to bet Zambia, you should count that. After a month, you will realize how much you spend on each category.
● Analyze the results. Perhaps you will realize that you can spend less on some purchases or that you can easily do without them. Is coffee on the way to work so necessary if it’s available in the office? Perhaps that $2 is better to put away.
● Make a budget for the next month. To do this, analyze the amounts you spent last month on each category and try to optimize them. Eliminate unnecessary purchases and find what you can save money on.
● Set limits for each of the major categories. To start saving money, you must limit your spending. The amount you set should be enough to cover all your expenses in the respective category in the next month. These limits form your budget. To start saving, you must stay within them.
● Set aside money in advance for big seasonal expenses. This way, you won’t have to rearrange your family budget and cut back heavily on other categories. Start saving a little bit a few months before you buy.
As a rule, when a person starts tracking, analyzing, and controlling expenses, the very 10-15% of income that is recommended to save will be freed up.
If you don’t have a safety cushion, save up for one first. This is your personal emergency fund. You should have enough money for three, or better yet, six months of your life. The safety cushion will help you in case you lose your job, your income is reduced, or you don’t have additional income. Such savings keep you calm.
To save money in a short period of time, try to avoid emotional and spontaneous purchases.
● Before going to the store, make a list of what you want to buy. Follow it strictly and don’t take too much. Don’t go to stores where you don’t plan to make a purchase.
● Before you put a product in your cart, think for a couple of seconds: do you really need it? Little things like that are a big drain on your budget.
● Don’t go shopping when you’re hungry — there’s a chance you’ll pick up extra groceries.
● Try to eat at home and spend less in cafes. As a rule, taking food with you to work is more economical than having lunch in a canteen. And often, it’s also tastier and healthier.
Before you set money aside, determine what you need it for. Formulate the goal clearly, for example, “To save $3,000 by September for a vacation with your family.” It will be clear to you how much you need to save each month to effectively move towards your goal.
To save money quickly, you shouldn’t only save but also look for sources of additional income. The easiest way is to revise your old things and sell what you haven’t used for a long time.
You can try to earn money from hobbies: you bake deliciously, then sell pies at Sunday markets, you can draw, post your paintings on stocks, if you knit, make a store on social media.
The chances are high that you have a skill that can be monetized. Remember what you were into before. If there has been no profitable business in your past, this is a great reason to think about what hobby you could and would like to start and how to earn money from it.
If you use all of these tips, it will be much easier to save money from scratch. The main thing is the system: save and keep track of your expenses, gradually approaching your goals. In this case, time works for you, and it remains only to learn to wait.
When you make your first big purchase with your savings, it will motivate you and help you develop a useful financial habit.