The New Year is here again and a lot of resolutions have been made which includes developing a money saving habit. Everyone has something special in mind that we dream to have at all cost, it could be that luxurious wedding, flashy car, big mansion, dream vacation etc. and sometimes we see impossibility stirring at us in the face because of the amount of money involved but the truth is, our own habit can make everything we desire possible.
To begin with, saving is deferring consumption by putting the money aside towards a goal which may include retirement, acquiring a house, college tuition fee etc. Note that the act of saving really requires self-restraint and discipline that is why it is easier said than done but the following guidelines will help make it easier and successful for you.
LIST ALL YOUR SOURCES OF INCOME
You have to make a list of all the sources you actually get income from no matter how little it is whether its your monthly salary, daily/weekly wages, allowances, up-keep money from your parents if you are not working, gifts in the form of money etc
RECORD YOUR EXPENSES
How much do you spend daily, weekly or monthly? You have to keep record of all your expenses, this means your monthly utility bill, fuel for your care, groceries, airtime for your mobile phone, transport fares and every single thing you spend money on. Putting everything together will help you to know the amount of money you spend in a day, week or a month.
DRAW A BUDGET
Now that you have an idea of your income and your expenses, the next best step is to make a budget to match your expenses against the income. This will also help you to cut down expenses and also eliminate unnecessary spending. Also in the budget make room for savings, you can start with 5% – 15% of your income and you can increase it as time goes on and you get used to saving.
Saving is best achieved when there is a motivation behind it and this should be the reason why you are deferring your consumption. Set a goal – this could be short or long term goals, for instance saving towards a dream wedding, vacation, emergencies are short term goals whiles saving towards retirement, child’s education, buying/building a house are long term goals.
SELECT THE RIGHT TOOL AND BE DISCIPLINE
At this point, you have to select the kind of savings tool that would be perfect for the goal you have set. Regular savings account, fixed deposit, mutual fund etc. are all short term savings tools and child’s educational fund, pension plan, balanced fund etc. are some of the long term savings tools. After the right tool has been selected, you then have to psych yourself up for saving journey ahead. You must save the percentage of your income as you have created in the budget religiously and this requires self-discipline. Also restrain yourself from touching the savings anytime you go broke until the target has been achieved.
After going through all the steps, you can then relax and watch your savings grow. Check your savings on a regular basis it could be monthly and the progress you are making can also inspire you to even save more.
photo credit to their respective owners!!