How to Start Saving Money
Most people know that saving money is important, but the biggest question is – how to start saving money? Sure, saving money might sound easy, but a lot of people are actually struggling to save, let alone open a new savings account. It is the actual execution of having a savings plan that often eludes them.
It is important to remember that saving money is important in order to ensure a comfortable future, not only for you, but for your loved ones as well. Trying to save money without any concrete plan will leave you feeling lost and disoriented and this will surely hinder your saving progress.
So if you have been planning to save money, yet you have not even started yet, it is important that you start by creating a savings plan and to make sure that you stick to it. To guide you through, here are the steps you need.
Set a Goal In Mind
First of all, identify what it is that you are trying to save for. Are you saving for the down payment of your dream house? If so, how much do you need? Or perhaps, you need the money for a vacation or you probably just want to build an emergency fund so you will have something to turn to in the event of unexpected financial needs. What about a retirement fund? Whatever your goals are, it is important that you identify it and that you should know how much is the specific amount that you need to save so you can stay motivated and be on track.
The truth is that a lot of people often shy away from the habit of saving money simply because they know they have easy access to credit. However, saving money will keep you from stressing over whether you have enough money to spend for certain things or not.
Open a Savings Account
The next step is to open a savings account in a bank. You might say that you already have an account, but it is important that you open a separate account dedicated towards your savings goal, instead of having just one account for everything.
It is difficult to tell which money is meant for if you have it in just one place. Remember that you will have to deal with so many demands in your daily life and it is hard to figure out if you have enough money to spend or if you have some money left to keep if you will keep everything in one account. You should have a separate account for each of your savings goal, whether it is for a house, an emergency fund or perhaps a savings for your dream vacation.
Begin Tracking and Trimming
You cannot escape having to run the figures and begin tracking your expenses in order to determine how much you have truly saved. So compute your basic expenses monthly and find out if there are ways you can trim your bill down, whether this is for utilities, mobile phone bills or groceries.
After this, deduct your total expenses from your monthly earnings and find out what is left over. One of the most helpful tips when it comes to this is to focus more on your discretionary expenses. These are the expenses spent on eating out, shopping, fitness and entertainment, and find out if there are ways that you can cut these down. Perhaps, instead of eating your lunch out every day at work, consider cooking your own lunch instead.
Come up With an Entertainment Fund
Cutting back on your discretionary expenses is not really about total denial. But this is about making sure that you are getting the most pleasure out of your day to day expenses that you choose to spend your spare money on.
For others, it will also help that they set up an “entertainment fund”, so they will always have money to spend for entertainment each month and not use your savings money to spend for those discretionary expenses.
Set It and Don’t Forget It
As soon as you have done the initial planning of your savings fund, the most effective way to stick to your savings plan is to automate the transfer of funds into your various savings accounts. You can do this by setting a monthly pre-authorized payment towards your bank accounts on every certain day of every month. This way, it will no longer be a question of finding that willpower to save each month. You should first save for those goals that you have and then spend what is left out of it.
Learn To Resist Temptations
Although automating your savings plan takes out much of the work when it comes to saving money, the best way that you can resist temptation is to totally avoid spending altogether. For instance, instead of spending your free time window-shopping at the mall, where you can be tempted easily by those clearance sales and storefront displays, consider taking a jog or a walk at the park instead. This is good for the health and will surely keep you away from temptations. Or better yet, look for other things that you love doing such as reading a book or staying at home and watching a movie.
Start Thinking Big
As soon as you have established the habit of saving money and that you have already built the basic framework of your savings plan, it’s time that you start saving for long term goals, such as saving for your retirement. The rule is that you should have at least 10% of your gross income saved in order to be able to live comfortably all throughout your retirement years. Although this might be a good jumping off point towards your journey to save money, it is best to figure out the kind of lifestyle that you really want for you retirement and then personalize your savings accordingly.
For instance, the 10% rule is ideal for those in the twenties and are just starting out their retirement savings. If you will start to save for retirement at a later time in your life, this percentage will have to be bumped up in order to account of the lost time. Perhaps, you may need to save about 20% to 30% of your total gross income.
And finally, the most important tip is to make sure that you stick to your savings plan no matter what. Even if you end up overspending some years or that you get to miss your savings target, always remember to have much more money saved than you would have, if you have not taken the effort to come up with a basic savings plan.
So if you are still wondering how to start saving money, the first step is to come up with a savings plan that is realistic and something that you know you can achieve. And most importantly, you should start saving now. If you start now, you should be able to reach your savings goals after a few months later or even at a later time. Nevertheless, if you come up with a savings plan now, then you sure will get there in time.