Savings is a tough challenge for many, especially in these economic times. It has become next to impossible to save a few cents in this materialism-driven world. Adverts and offers are always on our screens, seducing us to buy the latest models, jump on the next plane for an exotic vacation, or join a modern gym in Uptown.
How can we make sure we stay on course with our financial goals? How can we track our expenditure and what’s the easiest way to start saving?
1. The 50-30-20 Rule
This rule of thumb is as old as the invention of the coin. It is a simple way to ensure all your income is accounted for. Each number is a percentage.
50% should go towards bills and basic needs for yourself or the family. These include school fees, rent, food, and utilities.
30% can go towards what we consider wants. These are not basics but things that make life comfortable, like eating out and dressing up.
20% should strictly go to savings before spending any dime. Pay yourself first before anyone else.
2. Automate Your Income
You can have an arrangement with your bank where they make automatic transfers when money checks in. This makes saving as effortless as possible. Most banks and financial apps provide features that allow you to schedule these transfers, making saving a lifelong lifestyle.
These automations help you stay on course as there is no mix-up of cash flow. You can track every little cent through bank statements and plan your financial life better.
3. Save Up For Big Purchases
Are you planning a vacation, a wedding or do you feel like it’s time for a new whip? Such endeavours require a big budget or you’ll end up in debt if you are not careful. Give yourself time and space and plan accordingly.
Set aside a different account for such big goals and save until you are ready for it. It can take a few years but it’s better than running into debt. Don’t borrow loans to finance luxury, save and enjoy with no hassle.
4. Take Advantage of Interest
Do thorough research and choose a bank with a savings account that yields the highest interest. With such an account, the possibilities are endless. Your savings will grow exponentially and the money will be working for you as you sleep.
Don’t directly put money on your credit card. Save the money first, grow it before you spend it. That way, you’ll be spending interest while the savings keep growing.
5. Track Your Progress
Any little milestone should be celebrated and marked. The savings journey is challenging many times and we need all the motivation you can find.
Set goals e.g. your first 100K or your 1-year mark anniversary, and pat yourself on the back when you reach them. It may not seem like much but it will help you stay motivated to do even more. Your focus will also narrow as you look forward to smashing the next goal.
NB: Build an Emergency Fund
An emergency fund is vital and can carry you through the worst of times. It should have enough money to cover between three and six months’ worth of living expenses. It can be a high-interest account that allows you to earn compound interest.
What Are The Benefits of Saving?
- Psychological security (peace of mind)
- Financial security in case of emergencies or investment
- Earning passive interest
- Building a retirement plan
- Enhancing quality of life e.g. taking vacations or frequent medical checkups
- Debt-free
- Doing an investment portfolio in opportunities like stocks, bonds, and real estate
A financial advisor can help you create a holistic financial plan for your goals. The time-tested tips can and should be instilled in our kids so that they can grow up to be financially responsible adults. They will thank you so much, as parents, when they mature and will be set for life.
