Secret to Saving
Setting financial goals is one thing but it is quite another to achieve them. To achieve any kind of financial goal you are going to need a personal finance plan. Almost all of us have dreams of a bigger house, a better car or being able to travel the world, but surprisingly few implement the financial plan required to fulfill those dreams.
This all-important financial plan can be summed up in one word – savings. Saving money is key to financial success.
Saving is much like any other long-term endeavor – it begins by taking the smallest of steps. To help you turn those dreams into reality, Debts has laid out the following steps to financial success. More....
1) Save out of what you have
Waiting for the day that you have some extra cash to start your savings plan is the most common mistake made by wannabe savers. The truth is whenever we find ourselves with some extra money through a rise a work or a new job, we find we are still having to budget to get through the month. This is because most of us live beyond our means.
Needing extra money to start saving is a misconception, because a savings plan actually CREATES money for saving. It doesn’t have to be a large proportion of your salary, it can be as little or as much as you think you can afford. But wait, you think you can’t afford it. Well if that’s the case you need to read on.
2) Determine how much you can save
Decide on a percentage of your gross income to designate as savings. You could start by saving 10% or if that too great a reach, try 8%, or 5%. It is possible you think you cannot afford to save because you are reluctant to endure some inconveniences to make a saving plan work. Consider making cutbacks wherever you can, such as cycling to work, cutting back on coffees or preparing a lunch instead of buying out.
Top tip: We mentioned small steps earlier, but one large step you can make towards achieving your goals would be to have a proportion of your paycheck paid directly into your savings account. It may not be possible with every employer but some may be happy to oblige. Alternatively, ask your spouse or parents to retain some of your earnings, afterall, what’s out of sight is out of mind!
3) Write down financial goals
It may seem inconsequential, but writing your goals down on a piece of paper makes them real and not just a figment of your imagination.
Ideally you are going to need two saving strategies; short-term and long-term goals. A short-term goal could be something as simple as an item of clothing or a new stereo. Your long-term goals are more likely to be something much larger in scale such as a new house to put your stereo in!
On your piece of paper write how many dollars you are going to save and for how long. Doing this will tell you when you can make those short and long term purchases. Something else we should mention – to save you must be motivated. Documenting your savings will give you some of the motivation you need in order to fulfil your dream.
4) Create a budget
Write a list of expenditures and earnings for each month and use our handy budgeting calculator if it helps you keep track of your disposable income. You will find our budget calculator on the homepage.
Do not forget to include commuting costs to work or school and other expenses such as entertainment, bills and loan repayments. All expenditures should be listed, no matter how small.
5) Open a savings account
Stashing money under the mattress might have been the done thing when Lincoln was president, but ‘banking’ like that nowadays is considered foolish. Not only is your money liable to be plundered – by you of course – it will also gather dust when it could be gathering interest.
Avoid opening a savings account that is part of your checking account. In fact, you should be shopping around for the best savings deals, which may not necessarily be with your checking account provider. In any case, a separate savings account will ensure you are not tempted to dip into it whenever your checking account funds run low.
An internet bank is likely to offer the best interest rates for savings, which also means you can watch your money grow by going online. While online banks do tend to offer the best savings accounts, the credit crunch has been smiling on savers at traditional banks and credit unions. This is due to the fact that banks are desperate for money and will award high interest rates to anyone willing to invest in their saving accounts. So shop around!
6) Unexpected money
A windfall is often a savers downfall. When you come into some extra money through bonuses, salary increases, rebates etc, it may be tempting to spend it rather than save it, after all “it wasn’t figured into my savings plan anyway”. This kind of attitude separates the wheat from the chaff when it comes to individuals determined to prosper.
Injecting a windfall into a savings account can greatly accelerate your earnings, especially in the case of compound interest.
7) Dipping into savings
Over the course of a long-term financial plan you may be forced to dip into your savings. This can be unavoidable but it does not have to be the end of your dream – providing you have the right attitude.
If you access your savings in order to meet some financial need, it is crucial you view it as a loan that must be repaid as soon as possible. This approach will stop your savings from hitting the skids whenever you hit a bump on the road.
So what’s the secret? The secret to saving is that there isn’t one, most of us can do it providing we have discipline and a strategy. Remember, prosperity takes planning and success comes by saving!
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