The concept of saving has been talked about for ages. The internet is filled with all sorts of articles and videos about it but the habit doesn’t seem to stick. People keep on spending more and more, and developing a saving culture has become one of the toughest things. But not to worry. The secret is that you need to start early enough. Don’t start saving when you’re nearing retirement and worried of what to do next. Start now, and here are some tips to help you with that.
Be on guard
You need to be aware of how much you spend each month. The only way you’re going to have a clear saving plan is if you’ve got a pretty good idea of how much your spending. So get a book and write down all your recurring and one-time expenses. Get a good value of how much they are and try and minimise them. Writing these expenses down is the perfect way to keep track of them. You may realise that you could save a huge amount by cooking more often and ditching the daily ice-cream snacks.
Pay your debts
For your saving to really work for you in the future, you need to be clear of debts, whether it’s that logbook loan you got or your credit card debt for your furniture. If you’re in a position to make larger monthly payments then do so. The longer you stay in debt the more interest you’re going to pay.
Think of it this way. If you’ve got £1000 savings and £1000 of a debt accruing say 10% interest. Then at that point, you’re worth zero. You’ll be further killing your savings whenever you let the debts accrue, and your net worth would be eroding as time goes by. However, when you pay up all the debt immediately, then you won’t suffer from an eroding net worth even as time goes by.
Automate your savings
One way to save deliberately and consistently is by saving automatically. You could do this by creating a savings account through which you could automatically credit your savings to. Doing so ensures that you don’t forget to set that amount aside and it keeps you disciplined and on track. Also remember to ensure that your savings are proportionate to your income, so if you get another income source or passive income stream, increase your savings too.
Have an emergency fund
Emergencies are unexpected; that’s what makes them a very bitter pill to swallow. You’ll need to raise a huge amount of money immediately to cover for any emergencies and going for loans is not a very good idea. That’s why you should have your own personal emergency fund.
When saving in your emergency fund, remember to use a high interest savings account or a money market account. This will keep inflation from eroding the value of your hard-earned money.