Earning money is not a simple task. We encounter financial challenges on a regular basis due to recurring needs.
Interestingly, most of us barely make a regular input to our savings account. With the effects of the Covid-19 pandemic that led to an unstable economy and stagnant wages, more people were reluctant to save. Nevertheless, saving is significant.
- 1 Easy ideas on how to save money
- 2 What is the 30-day rule of saving?
- 3 Implementing the 30-day savings rule to build your savings
- 4 What is the importance of savings?
There are various ways and strategies to help you attain your money goals. Whichever plan you apply, they may be overwhelming, and you might need some guidance. This article is your best guide if you are planning on effective saving.
Easy ideas on how to save money
Below are the best five strategies to save your money. Bottom of Form.
Keep track of your expenditure
If you want to spend less and save more, you have to know where you spend your money. To make it easier, create your budget. A budget will help you figure out your financial position, what you can or cannot afford at the moment, and how to get closer to achieving your goals.
Moreover, you can establish areas you may be spending unnecessarily and cut down on costs. Tracking your progress is key to managing your finances.
Try a month with less spending
Attempting such challenges is interesting because it’s like a game, but at the same time, it promotes good financial practices. This is an effortless task. All you need is to do is constrain your finances to only necessary things.
For instance, walk or bike instead of driving, carry a home-packed lunch to work, try out free entertainment alternatives. Spend less and save more.
Such challenges act as eye-openers. From the cash you’ll have saved by the end of the month, you may reevaluate some of your spending decisions in the future. You may start looking at cheaper alternatives before spending your money. This will eventually become a habit that you’ll learn to embrace.
Pay yourself first
The basic idea of the ‘pay yourself first principle is to ensure that you pay for all your expenses first before you can spend money on other luxuries.
Most people have found themselves in situations where they spend on shopping, movies, expensive foods before they even look at their bills after they receive their paycheck. This situation can land you in deep trouble; hence it is always good to plan.
Nowadays, most bill providers have automatic pay bill; all you do is select a day to pay the bill. This plan gives you a chance to manage your finances responsibly, so you don’t end up broke mid-month. You can enjoy the luxuries from the remaining amount at your discretion.
Transfer at least 10% to your savings account
Having a savings account is important in saving for better record keeping. If you don’t know the amount to save in a month, you can apply the 10% rule thumb. Saving 10% on a regular basis despite your income is a guarantee that you are living within your means.
If you would like to save more, then why not? It is; however, better to start with a minimum of 10%. You can apply the 10% rule with the ‘pay yourself first method.’
With this, you can set up automatic bank transfers so that there is a percentage of funds transfer from your checking to savings accounts before you can spend the money on something else at the beginning of every month. Think of the savings money as an investment rather than a liability.
Pay off your debts
Paying off debts should be a part of your financial plan to have a better grip on your finances. Moreover, it also frees up your cash for other financial goals.
There are two ways in which you can decide to pay off your debts. You can opt to pay the debts with high interest first or start with the small debts.
You have the discretion to apply whichever method you prefer. The first option sounds more favorable for many to prevent the accumulation of interest.
On the other hand, others prefer the second option, commonly known as the snowball method. This method entails paying off the small debts while paying a small portion to all other debts.
When the first small debt is complete, channel the money used to the next small debt while still paying off small amounts to other debts. Continue with the process till you clear off all your debts. This method is best applied to debts with almost similar interest rates.
Whichever method you prefer, the main goal is to clear your debts. Clearing debts gives you a better chance to monitor and save your money.
What is the 30-day rule of saving?
The 30-day rule of saving is an easy financial trick that helps with the management of finances.
With this rule, you refrain from purchasing any unnecessary thing for 30 days. This rule curbs behaviors of impulse buying. The 30 days give you time to think if you need the item or not.
After 30 days, if you still want to purchase the item, you can go ahead and get it. Alternatively, if you realize the purchase was not worth it or forgot about the item, you will have saved yourself from wasting finances which is a plus to your financial goals.
Implementing the 30-day savings rule to build your savings
Identify the essentials and non-essentials
Any individual who is new to the 30-day rule of saving has to start with identifying the needs versus wants.
Jot down a list of your monthly expenditure. Every essential on the list is a need and remains part of your monthly expenditure. The rest can fall under the ‘want’ category; thus, you can subject it to the 30-day rule.
Have an active savings account
The main idea behind this rule is to maximize your savings. Meanwhile, you can add the money to your savings account as you wait and see if the item is worth the money.
Having your money in a savings account will earn interest in the meantime. This way, all your extra money can earn you more money.
Set aside money for entertainment
Having to wait for 30 days to make any non-essential purchase can be daunting. Waiting for a month to make a purchase involving a large sum of money is bearable, unlike for small purchases like going to the movies.
This makes it harder to adhere to the rule, and it is understandable. It’s only fair that you get to enjoy your hard-earned money as well. In this case, setting up an entertainment fund comes in handy.
You can enjoy the little luxuries without having to reduce your savings. This will also help many in sticking to the rule.
Benefits of the 30-day rule
- The 30-day savings rule helps you in saving money.
- It is a simple process that prevents you from making any non-essential purchases. This means there is no room for emotional buying; hence you can minimize your expenditure and maximize your savings.
- The 30-day rule only works if you stick to your decisions for the 30 days. This helps instill discipline in financial management for an individual.
- It provides for a win-win situation. You can either get the item or add money to your savings after the 30 days are over.
- The rule does not entirely restrict one from making any purchases. After 30 days, if you still want to make the purchase, you can go ahead and get it.
- Offers a sense of satisfaction. After completing the 30 days, you’ll surely treasure the item if you go ahead and purchase. You’ll also gain satisfaction from the amount of money saved by not purchasing the item.
What is the importance of savings?
The benefits of saving money are one which you cannot underestimate. Most financially successful people achieved their goals through saving and still continue to save to plan for their future goals.
It is a key financial habit that you should pick up in order to succeed in your life plans. Starting and adopting this habit doesn’t come easy. It takes a lot of sacrifices, determination, and discipline. It is, however, possible.
If you still don’t understand the impact saving can have on your finances, here are some of the major reasons why you should start saving too.
- Acts as security
The future is unpredictable. Having some savings acts as security in unforeseen circumstances. It will save you stress when faced with financial strains, for instance, when you will be too old to work or in case you lose your source of income. The more you save, the more security you have.
Emergencies are unavoidable. Sickness is one of the many common emergencies that can happen at any time, and hospital bills can tamper with your financial situation. Having an emergency fund will lessen your worries when there is an emergency that necessitates extra funds.
- Secure your loved ones and dependents
Death is inevitable and part of human life. It is important to always think about our loved ones not to face double tragedy when you are not around, for example, the tragedy of losing a loved one and the tragedy of being in a financial crisis.
As a sole breadwinner, in case of death, your family loved ones, and dependents will be financially secured and have the means to start off life from your savings. In addition, the savings can also cater to the burial expenses to ease the burden on your loved ones.
College fees are quite expensive. Planning is important. Savings can be useful in paying college fees for your children, as not everyone can afford to pay such huge amounts in one go.
- Stress Reduction
Having extra money is generally a relief. You don’t have to worry about anything because you have yourself secured. Furthermore, it guarantees you peace of mind, unlike when you have no extra money in your account.
- Enjoyment purposes
Saving money should not hinder you from having fun. You should always have some money set aside for entertainment. Enjoyment is necessary for your general well-being. You can be saving up for a vacation which is absolutely fine.
- Liberty to pursue a career of your choice
It is common to hear of people who are stuck in a job they don’t like because they have no financial freedom to quit and do what they enjoy. Having some savings offers you a smooth transition from one job to the other while still financially secured.
- Funding Events
Life has many events, for example, weddings, baby showers, and birthdays. Some of these events can be quite expensive; hence it is important to save for them. This will also help protect your current finances and the risk of sinking into debt.
- Making big purchases
Some big purchases such as cars, TV, furniture are quite expensive. Saving up for such purchases is a smart decision rather than buying one loan that will have you in debt.
- Building and managing a home
It is everyone’s dream to build or buy their own home. This is a very costly venture and hence needs prior planning. Moreover, owning your own home comes with a number of expenses like the remodeling of certain areas like the kitchen, small repairs and fixes, and other minor expenses.
Most times, you may be able to fund these expenses directly from your pocket. However, it is advisable to have savings account for such expenses. This will allow you to manage your current finances well and avoid unnecessary financial stress.
- Managing financial risks
Investing your money into a business is a financial risk. Having some money saved up will protect you from bankruptcy in case the business fails.
- Financial independence
Savings provide financial freedom and independence. No matter the situation, you always have some money as security. On the other hand, saving less will lead you to debt and thus financial dependency.
- Helping others
Some people save up some money so as to take it to charity or even to church. This is a good way of giving back to the community. Saving up will help you dish out a substantial amount, especially if your income cannot fund a charity in one go.
Today is the day to start saving your money
If you want ways of saving money, remember to think outside the box. Everybody has different spending habits, so you will most likely have a few special scenarios in your life that may help you come up with more ways of saving.
Additionally, you might want to begin the process by keep track of your spending for a while. Once you know where the money goes every month, it is much easier to know the source of the money miseries.
Even small changes will make a huge difference.