Saving money is crucial for anyone who wants to live a comfortable life. And it’s not just about having enough money to pay the bills. Saving money also means being able to afford the things that you want. Talking (or writing) about money is always uncomfortable for anyone. We have not been taught to openly discuss money. No worries! It’s just you and me here. Well, actually it’s only you who has decided to read this article to learn about saving money. You are already one step ahead of becoming wealthy! If you can keep the patience to read the article to the last, I hope you will learn something new today. At the least, you will start thinking about your finance.
Why Should You Save Money At All
The younger generation is often labeled as the “spending generation”. This may be because many of us do not realize the importance of saving money. Even If some of us do, it is often saved for a rainy day and not for long-term goals like retirement.
According to a study by Bankrate, 46% of respondents said they don’t think they’ll have enough money to retire when they want to. The older generations are in much better shape because they took advantage of the opportunity to save when interest rates were higher.
In order to avoid these problems, you should start saving money for retirement from an early age and automate your savings from every paycheck into a separate savings account in a bank. Why separate savings account? I have identified the reason for you in the next section.
Separate Your Spending And Savings Account
Most of us have a savings account at our bank. And we know that it’s important to save as much as we can. But there are two types of saving accounts: one for the short term and the other is for the long term. The short term is usually recommended for those who want to save some money at the end of the month, but are not sure how much they want to save. This account will allow you to deposit and withdraw your money easily and with low fees, but the interest rates are not as good as those on a long-term account. A long-term account can be opened with any amount of money, but requires more paperwork and identification; you will also need to keep your balance over a certain limit in order to avoid monthly fees.
The reason I’m asking you to use a separate bank account to save money is pretty simple. Since the account is meant for the long term and will occur additional fees to withdraw money, you will be less tempted to spend from that account. I would further suggest minimizing your own access to the account as much as possible like not connecting a debit card with the account. This way, you will be able to force yourself to save a certain amount of money every month (or week, whichever you prefer) for a long period of time. This brings the question of how much do you want to save every month? To determine that, first you need to determine your limit! Yes, we all must know our limits.
Know Your Limit – Maintaining A Monthly Budget
New York Times bestselling author and world-renowned leadership expert John C. Maxwell quoted “A budget is telling your money where to go instead of wondering where it went”. Knowing your spending limit is the key to living within your means. Some people are not aware of their limits because they are not budgeting their monthly income or spending. Knowing your limit can be hard, but with a budget planner on your smartphone, it’s easier than ever before. It will help you set up your monthly budget and know exactly how much you can spend on different things in order to save more money in the future.
Budgeting helps you figure out how much to spend on different things and what your limits are for monthly income and spending activities. There are plenty of apps on the market both free and paid versions. I would suggest you start with a free version. Below are the 6 best budgeting apps for 2022 according to Investopedia–
Best Overall: You Need a Budget (YNAB)
Best Free Budgeting App: Mint
Best for Cash Flow: Simplifi by Quicken
Best for Overspenders: PocketGuard
Best for Building Wealth: Personal Capital
Best for Couples: Zeta
Know Your Expenses – Tracking Your Expenses
Once you set up your monthly budget, the next step is to track your spending. You must be aware of all the expenses you make. You may think, “Hey! I already know how I spend my money. It’s all in my head!” Now if I ask you how you have spent your last month’s salary, can you give me a list of what are the things or on what purposes you have spent all those hard-earned money. I guess no! The American business magnate, investor, and philanthropist Warren Buffet once said, “Do not save what is left after spending, but spend what is left after saving”.
My father used to keep a diary of daily expenses. He used to write all the expenses every single night before sleeping. With technological advancement, we don’t need to do the hard work. Our smartphone can do this for us. How? There are plenty of expense tracker apps on the play store and Appstore. Most of them have free versions with limited features which are more than good enough to track your daily spending. You can also use the same app for budgeting and expense tracking.
Practice Saving Money Every Week
Saving money is a habit, like your coffee habit or smoking habit. Most of the people who save money regularly are saving on a monthly basis. Generally, you get your salary and transfer a certain amount to the savings account. Most financial advisors advocate doing so. I have also followed this saving pattern for a long time. However, recently I have changed my saving habit to weekly from monthly, although I am saving the same amount of money.
For instance, if I want to save 100$ a month, what I do is that I save 25$ per week. Every Monday morning, the first thing I do after waking up, I transfer that 25$ to my savings account. This is where the compounding trick works. If you start saving money weekly, not only you will compound the money weekly, but also your saving habit will grow exponentially. Imagine, you are going to the gym once a month or once a week. Which one do you think will give you more growth? It’s the same for your money too.
Stop Browsing Online Shops When You’re Bored
The shopping malls are now in our palms, open for 24 hours every day and with lots and lots of discounts & deals! Online shopping can save you money sometimes which I would not deny. I will write about it someday how you can save money by shopping online. But for now, let’s put that topic aside, and let me tell you how I realized online shopping is bad for my bank account health.
I came to Singapore in the month of August and the 9th of August is Singapore’s National Day. All the online marketplaces here were full of offers and discounts in that period. I thought this was my chance to grab some products at a very less price. I bought a few products. Then came September, there were 9.9 sales everywhere, then 10.10, 11.11, and so on. So after a few months, I realized that the watch I bought on the August sale was the same price all the time except a few dry days (I mean no sale days!). At this point, I realized all these sales/offers/discounts are actually a marketing strategy to provoke the customers to buy more and more. It’s known as the FOMO (Fear Of Missing Out) effect. A famous Swedish Proverb says, “He who buys what he does not need, steals from himself”.
Wise Men Say
I generally like to read e-books that talk about money and also try to follow people who are wealthy (not rich!). Wondering what is the difference between being wealthy and being rich? In my next article, I will tell you. Meantime, I hereby share some of my favorite quotes from wise and wealthy people about saving money. You may also be interested to know why I started reading e-books on my smartphone. Read & Ponder! Cheerio!
Do not save what is left after spending, but spend what is left after saving. – Warren Buffett
Never spend your money before you have it. – Thomas Jefferson
A man who both spends and saves money is the happiest man, because he has both enjoyments. – Samuel Johnson
Being a smart shopper is the first step to getting rich. – Mark Cuban
You don’t have to see the whole staircase, just take the first step. – Martin Luther King, Jr.
Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises. – Aristotle
He who will not economize will have to agonize. – Confucius
Small amounts saved daily add up to huge investments in the end. ― Margo Vader
He who buys what he does not need, steals from himself. – Swedish Proverb