It’s never too early to start saving. In fact, the earlier you start saving, the better! However, saving is easier said than done. You can grow your savings and reach your financial goals by following these simple yet effective tips.
Settle your debts
Before you can start saving money, you have to settle your debts first. Pay off your credit card debts and existing loans as soon as possible. Saving money when you’re neck deep in debt just doesn’t sound logical. Clear off your debts so that all the money you save is all your money.
Consider your savings as a bill you need to pay
Set up a savings account, and every month, make a ‘payment’ to yourself. If you think of your savings as just another bill to pay, you will make ‘payment’ a priority each month.
Furthermore, you will spend less time deciding whether you should put money in this time or just save it for next time. You don’t do that when it comes to paying your electricity or water bill, do you?
Set up a cash cushion
It’s money that you can easily get your hands on anytime, especially during crises or emergencies. It’s money that can keep you afloat for the next two to three months. This should be able to cover payment for utilities, food, transportation, insurance, and mortgage, or other expenses that may arise in the coming months.
If you need to know how much should go to your emergency cash cushion fund, calculate all your monthly expenses. Include payments for tax, insurance, pension, shopping, childcare, etc.
Once you have everything added up, this is the amount you need to live comfortably. Multiply that two or three times (or depending on how many months you want to be covered), and this is the amount you must save to be able to survive without any other source of income.
Create other sources of income
Do your friends and family gush over all your handcrafted gifts every Christmas? Do you have mad skills in drawing and design? Can you bake outrageously delicious cakes? Are you a master storyteller who can easily string words together and create magic?
These can be a way to earn extra income! Use your skills and talents to create new money flows. Let your friends and family be your first customers. Remember, all the extra income that you will earn should not be spent on that new iPhone or that ridiculously expensive pair of shoes. Give yourself a little treat, but you need to put a big portion in your savings fund.
Increase your income, not your expenses
It’s so easy to fall into the trap of spending more when you start earning more. After all, you can afford it. However, if you want to grow your savings, spend like there’s no extra income or salary raise to spend with, even if there is.
Of course, you can enjoy the extra money occasionally, but a huge chunk of it should go into your savings and emergency fund. You’ll never know what the future holds, so it’s always a good idea to be prepared and well-funded.