Practical ways to save money
Saving first and then spending the rest is said to be the basic and necessary principle to save money.
- Change your money mindset
Our beliefs about money impact our actions. Before you can save money, you must have faith that you can do it. “If your subconscious has a belief that it can’t be done, you will never be able to do it,” says Amanda Abella, founder and CEO of Make Money Your Honey.
That’s why Abella encourages people to seek out information about wealth consciousness and money mindset. From reading books like Think and Grow Rich by Napoleon Hill, to listening to financial podcasts, you can develop a belief that you can be rich and financially stable.
Souffrant, a financial education instructor, says that shifting the mindset to “I will save first, then spend what’s left, instead of the other way around” is fundamental and necessary.
- Must have a budget
If you don’t know how much you’re spending versus what you’re earning, it’s difficult to make any financial progress. “A budget or spending plan is useful because it gives you an inventory of your habits: what you spend on and where the budget leaks are,” Souffrant explains.
This expert recommends recording spending for 2-3 months using a book, spreadsheet or an app. View account statements to determine the amount spent for each category. From there, you will know where money is leaking and make adjustments.
- Set clear goals
“Be as specific as possible in your goals,” advises Dr. Tanya Ince, a money expert and business consultant.
If your goal is a trip abroad, estimate the total cost. Once it’s clear, you’ll know how much you have to save and how long you have to save it for.
Ince recommends printing a photo of the car or tourist destination you want and posting it on the refrigerator door or computer screen to remind yourself every day.
“If we have too many goals we will get overwhelmed and make poor financial decisions. That’s why it’s important to choose one or two top priorities. If it’s important It’s important to save for a house, but if you have to give up the trip, don’t feel bad because you can always satisfy yourself with a less expensive alternative.
- Automatic
Many people want to save but often spend first and then deposit the remaining amount into their account. As a result, they rarely achieve their goals. To be efficient, automate. Set to automatically transfer to a savings account as soon as your salary comes in. You can choose the number that suits you each month.
“When savings are automatic, you won’t have to think about it,” Souffrant says.
- Start small and be consistent
“Research shows that people increase their savings over time. The hardest thing is getting started. So start small and save regularly,” Ince recommends.
Many people say “I work hard, I deserve this. Life is short and I can’t take money to my grave”. But the problem here is not whether you deserve something or not, but understanding that time will never come back. If you save small amounts, you can still enjoy life.
“Saving money doesn’t have to mean starving yourself. Long-term goals like buying a house or traveling internationally may seem far away. But if you save consistently over time, you will achieve it.” that,” Souffrant explains.
It’s like going to the gym, your stomach won’t be flat right away. But if you practice for a whole month you will see a difference. Get started and be consistent. Your future self will thank you. “Commit to increasing your savings by 1% each year,” Ince suggests.
Practical ways to save money
- Identify the best places for funds
Putting money in a savings account isn’t always the most profitable option. Souffrant explains that where you put your money depends on what you need it for.
If it is an emergency fund, it should be equal to 3-6 months of living expenses and should not be saved but should be kept in cash to take out at any time. This fund is not only used in negative situations, but the extra money also allows you to have surprises, such as traveling or taking a course.
In addition to this fund, there are also pension or investment funds. If you’re not saving for short-term goals, maybe consider mutual funds, or retirement funds that will earn higher interest rates.
Investing in stocks is riskier but offers much higher returns and over time than savings accounts, Souffrant says. So, don’t invest the money you need in the near future.
Abella recommends opening different savings accounts with labeled names that represent your goals: money to buy a house, a trip abroad…
- Increase income
To get more income, ask for a raise, work more hours, or take on a side job. “For those who have no gap big between spending and income, there won’t be much money to save. In these cases, focusing on increasing income is the best strategy,” Abella said.
It is important that you have money from different sources. Whether it’s freelancing, becoming a social media influencer, or selling unwanted items, you’ll be able to set aside more money.
- Find companions
Like changing any habit, sticking to your savings goal isn’t easy. Finding someone or a group to hold you accountable can make all the difference.
When you have support on your journey, you’re more likely to stay motivated and reach your destination. You can also listen to podcasts, join savings groups, and read inspirational materials to help you stay focused and motivated. If the people around you aren’t changing, connect with groups and online resources that will help motivate you.
- Start now
“The longer we wait, the more money we lose. The power of time and accumulation is huge. The difference is hundreds of thousands of dollars,” Ince said.
If you start saving now, interest will not only accumulate on the initial amount but will be compounded. For example: If you start saving $300 a month at age 25 and do it consistently, by age 65 you will have accumulated $1 million (assuming an 8% interest rate). If you start at age 35, saving the same amount every month at the same interest rate, you’ll have only $450,000 at age 65. If you start at age 45, the amount drops to $178,000, and at age 55 it will only is $56,000.
But don’t be discouraged if you start later because it’s better than nothing.
