Money makes the world go around. But not having enough money can make you
run around in circles. Just like the saying, ‘a penny saved is a penny earned,’ the
importance of savings, unfortunately for most, comes rather late in life.
When is the best time to start saving?
The right answer is – NOW!
There’s no fixed age to begin saving, however, the earlier the better is the rule of
thumb. Learning about saving and the other aspects of financial literacy is a vital
life skill to add to your self-development kit. Without the right knowledge about
managing your personal finances, you’re staring at the prospect of carrying your
poor money habits well into retirement.
It’s always good to be curious and find out more about where your hard-earned
money is going, whether it’s turning into something meaningful or going down the drain.
The hardest part about saving is getting started, and if this is something you’re
struggling with, then this article is for you.
1. Understand Your Relationship with Money
Money makes the world go around. But not having enough money can make you run around in circles. Just like the saying, ‘a penny saved is a penny earned,’ the importance of savings, unfortunately for most, comes rather late in life.
When is the best time to start saving?
The right answer is – NOW!
There’s no fixed age to begin saving, however, the earlier the better is the rule of thumb. Learning about saving and the other aspects of financial literacy is a vital life skill to add to your self-development kit. Without the right knowledge about managing your personal finances, you’re staring at the prospect of carrying your poor money habits well into retirement.
It’s always good to be curious and find out more about where your hard-earned money is going, whether it’s turning into something meaningful or going down the drain.
The hardest part about saving is getting started, and if this is something you’re struggling with, then this article is for you.
2. Identify Your Spending Triggers
Spending triggers are behaviours that lead to overspending against your better judgement. These triggers are either due to emotions, people or situations. Indulging in mindless shopping just because you’re bored with nothing better to do is an example of an emotional spending trigger. A situational spending trigger is going out with your friends or colleagues for an expensive lunch or dinner.
Reflecting on triggers that lead to unnecessary spending and overspending can make you aware of your financial behaviour. It can help you be more vigilant to avoid being triggered and making poor financial choices.
3. Spend Less
The reality of having more months at the end of money is a bitter pill to swallow. If it happens more often than you’d like, it’s time to learn how to spend less than your paycheck. It may go against the obvious mantra of saving money, but spending less contributes to your future savings in more ways than one. Getting an overview of your income and expenditure can shed light on where the money is going.
Track your expenses daily to notice trends in the way you spend money. At the end of the month, you’ll know where to cut back on – the weekly online sales or the pub crawls every weekend. You’ll be surprised by the amount you’re putting back into your pocket but cutting down on frivolous wants
4. Pay off Debt
Saving money is pointless if you have a huge debt on your head. For example, it is better to pay off £180 in interest over a £1,000 credit card debt than to save the same amount in savings, which yields only £20 at a 2 percent interest rate. You’re better off by £160 when you pay off your debts first.
Ensure you’re keeping track of all your debts, from credit cards to student loans to home loans. Not all debt is equal, so it helps to check the interest rates if you’re looking to prepay your debt.
4. Start Small
It may seem like nothing at first, but start saving even though it’s just a few pounds. Saving anything is always better than saving nothing, so start small. You can collect all your savings and transfer them into another account so you’re not tempted to spend it. Give it enough time, and just like how little drops of water make a mighty ocean, you’ll be astonished to find hundreds of extra pounds saved from your pocket change.
5. Budget and Stick To It
Making a budget is another important step to save and build on your personal finances. There are many ways to budget, but it can often complicate things for those struggling to start saving. One simple way to go about budgeting is to divide your monthly paycheck into three fixed parts: needs, wants, and savings.
If you receive £2,000 in your monthly paycheck, you can put in 50% to meeting needs (rent, food, bills), 30% on wants (treats or anything you’ve been looking forward to enjoying), and the remaining 20% on savings (for investments and emergencies).
This 50-30-20 strategy can help set aside a percentage of your income for all that you need and want without affecting your savings at the end of the day.
6. Visualise Your Savings Goals
A plan without a goal is just a wish. Set realistic and tangible saving goals and define them. Whether you want an international holiday or are looking to buy a car, set a clear goal for why you’re saving up.
The next step is to start building up your savings and bring this goal to reality. With a goal in sight, it’s natural to get excited and work sincerely towards achieving it.
To Sum Up
Once you’ve started and are well on your way, you’ll soon realise there are many solutions out there in addition to these six. Whichever way you begin, learning how to save money early on and get your financial situation under control is a life-changing skill that is sure to pay off one way or another.
If after reading this article you’re feeling optimistic about building a brighter future in personal finance, that’s great news! The time is ripe to set the money ball in motion!
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