When you ask financial experts about how you can succeed in saving money, you will get a variety of answers. Some recommend allotting 20 to 25 % of your take-home pay for savings. Others will tell you that the amount of savings that you have should equate three months of your salary.
This way, you would have money to spend in case you get laid off your job or any financial emergency ensues. You may also receive advice that any amount that you can save from your salary will do. No matter which advice you take to heart, what’s important is for you to make saving a habit, and the best time to start is right now. Buckle up, it’s time to read the beginner’s guide to saving money!
When Should I Start Saving? Right Now!
Why is it important to start saving, and why should you do it right now? Take a look at the following reasons:
- You need to save up for your kids’ college education. If you’re already at that stage in your life when you are starting a family, you would be required to save money for your child’s college education. The best time to start is while they are still young. Look for a savings plan that will maximize the value of your savings. If you’re financial savvy, you might even invest the savings in non-risky investments and allow it to accumulate value over the years.
- You should have enough funds saved up for retirement. Whatever your domestic situation is, the one fund that you should not be without is for your retirement. Being at that age when you are unable to work will require you to have funds for everyday living expenses, so you need to have plenty of money saved up. Similar to your child’s college fund, you should start saving up for retirement as early as possible.
- You’ll never know when family emergencies might crop up. It is important to save money right now because you will never know when family emergencies might crop up. Visits to the emergency room, a job loss, accidents, death in the family – these are unexpected events that will take its toll on your finances. By setting aside a savings fund, you can have something to spend for these family emergencies.
- You need to save up for inflation. Although there are jobs which offer security and salary increases in the future, you still need to save up for inflation. The cost of everything – from grocery staples to education and health care – are continuously on the rise. By setting aside funds on a savings account, you can have that buffer for future expenses.
A Beginner’s Guide to Everyday Saving
Now, if you’re a beginner in the saving department, what are you supposed to do to get a head start at the task? Take a look at these easy-to-follow tips:
1. Pay yourself first
As a beginner saver, the number one tip to remember is that you should always pay yourself first. This ‘payment’ from your own salary comes in the form of setting aside money for your savings account.
The percentage or amount of money that you will allot for that savings account is entirely up to you – it can be 10 to 20% of your take-home fee, or more. If you think that you have too many expenses on a monthly basis, you can even set aside just $10 per month. Every little dollar counts and if you do it regularly, the amount will eventually add up.
2. Take full advantage of the wonders of banking technology
Before the birth of Internet banking, those who have bank accounts usually get surprised at overdrafts and other charges that they get billed for on a monthly basis. This is because there’s a time lag between the actual banking transaction and when they’ll receive the banking statement.
Today, it takes less than a minute to log in to your online bank account so you can easily update yourself with the charges. There are even banks offering notification or instant alert services so they would know what their balance is and receive warnings when the amount dips behind the threshold level. This is a really useful service to avoid the otherwise expensive overdraft charges and other fees.
3. Have a clear set of short-term and long-term financial goals
If you’re setting aside 10% of your take-home pay and there’s a significant amount already in it, what will you actually be spending the money for? It can be for your own retirement, the kids’ college education, down payment for a new car or even a vacation somewhere exotic. When you have a clear set of long-term and short-term goals, you will be more motivated to save.
4. Implement ways for you to save money without having a major shift in your lifestyle
One reason why a lot of people fail to save money in the first place is that the recommended ways for them to save involve a major change in lifestyle.
If you love watching one movie after another at home, you may not necessarily want to sacrifice allotting a certain amount in your budget for DVD rentals. But what if there’s a cheaper way for you to still watch all the movies you like? Remember that when it comes to saving, every little cent and dollar will eventually add up.
This means that you should look for ways that you can save money without sacrificing the little things in life that you so enjoy. Don’t deprive yourself of your coffee fix but skip the pricey lattes. It’s cheaper to brew your own coffee at home. Planning vacations ahead of time, doing your own maintenance on cars, cooking at home often – these are the small, effortless things that you can do to save money.
5. Create a household budget and stick to it
Are you living alone or with family? Depending on your current domestic situation, you can create a household budget where all the expenses are accounted for. Your major, priority expenses if you have a family should include utility bills, home mortgage or rental, grocery items, clothes for the kids, transportation allowance for the working parents, etc.
Check if there are any items on the list which you can further cut back on or completely eliminate. Once you’re satisfied with the budget you created, make sure that you will stick to it. If necessary, make adjustments along the way.
6. Learn about long-term savings and investments
Whether you’re just starting to save or not, you need to think about long-term savings and investments. Prior to that, make sure that all your credit card debts are paid off. Keep a few thousand dollars cushioned in your checking account – then allot the rest of what you have for long-term savings and investments.
If you have no idea about which long-term investments would work, seek the help of a representative from your bank. They should be more than happy to assist you in coming up with a plan to save up those hard-earned dollars for a long-term investment instrument that you can use for the future.
7. When it comes to incurring savings at home, the little things do add up
Ditch the landline if you’re hardly using it. Buy second hand books or borrow them from the public library. Go outdoors and sweat it out when exercising instead of paying for pricey gym membership fees. There are plenty of other areas in your life where you can save money, and every cent or dollar that you can save will add up in the long run.
8. If you’re considering buying a big ticket item, hold off on making a decision
Unless your TV or washing machine stopped working, there is no need for you to be an impulsive buyer, especially when it comes to big ticket items at home.
You might be tempted to use your credit card for a fancy TV set simply because on sale, even if you have one at home that is working perfectly. These impulse purchases will be your undoing because the money spent will prevent you from saving. If there’s a big ticket item that you are considering buying, sleep off on the decision. By morning, you might realize that you don’t really need it, after all.
9. Take advantage of items that you can get for free
Use coupons wisely – a $5 coupon for an item that you don’t really buy in the first place is simply a waste of time. Do use online and physical coupons for the grocery or drugstore items that you would usually buy so you can take advantage of the discounts. When going grocery shopping, make a list or take advantage of the items which are offered for free.
10. Pay off your credit card debts and avoid late fees on all your bills
Finally, pay off your credit card debts and pay your utility or credit card bills on time to avoid late fees. If you have more than two credit cards, think about cancelling the others and maintaining just one or two that you can use for emergency expenses.
Credit cards may be super convenient to use but if you don’t manage your funds properly, it might leave you neck-deep in debt. There are also some banks and merchants who offer perks for those who pay their bills on time, so make it a habit.
There’s really no reason for you to put off saving any longer – so start right now!