Salary and savings are a match made in heaven. Everyone recognizes their shared dependency. However, many people fail to develop the habit of saving on a regular basis. The higher the pay, the greater the savings; the lower the salary, well, it should still be a significant savings! It’s the leftover cash from a hard-fought battle between expenses, liabilities, and entertainment. But one thought never leaves your mind: “How much should I save?”
Unfortunately, there is no such thing as a perfect answer. Each person has unique demands and priorities. Savings should be treated as a need and a top priority. The amount you can save is, of course, determined on your age and salary. Let’s look at a few criteria that might help you decide how much money to set aside for savings:
1. Budget: Your new best friend
Budgeting is the cornerstone of financial success and learning how to save money effectively. It provides a roadmap for you to manage your income and expenses and enables you to make informed decisions about your finances. By diligently recording all sources of income and noting down every expense, you gain a comprehensive understanding of your financial situation. This knowledge empowers you to identify areas where you can cut back on unnecessary spending and allocate more funds towards saving each month. With a well-structured budget in place, you will have the confidence and control necessary to achieve your savings goals while still enjoying a comfortable lifestyle.
2. The art of saying NO to expenses
When it comes to managing your expenses, it’s crucial to prioritize and make mindful choices. While necessary expenses like food, rent, and groceries should be retained or reduced, there are specific areas where you can trim down costs. Unnecessary subscriptions, impulsive purchases, and excessive food orders are examples of expense buckets that you can target. By making these adjustments, you can effectively redirect the money saved towards building up your savings and investments for a more secure future.
3. Get Rid of Your Debts
Debt can significantly hinder your savings goals. It’s crucial to prioritize paying off any outstanding debts, especially those owed to the bank. By focusing on debt repayment first, you can safeguard yourself from financial risk. Additionally, it’s wise to exercise caution with credit cards and avoid excessive usage. In fact, refraining from using them altogether is highly recommended for maintaining a healthy financial standing.
4. Think before you borrow
In today’s world, debt has become an integral part of our financial landscape. While the idea of eliminating debt may seem unattainable, it is important to recognize that not all debts are equal. Certain types of debts can actually be beneficial in helping us achieve our life goals and improve our financial standing.
For instance, home and education loans help you achieve specific life goals that can increase your income and assets. However, debt from credit cards can quickly become unmanageable if you don’t pay attention.
5. Save with a purpose
Without a clear understanding of why you are saving, it can be challenging to maintain motivation. That’s why it’s crucial to have specific goals in mind. Set precise goals for yourself and create a plan to achieve them. It will be easier for you to track your progress this way. Knowing that you are getting closer to your goal will provide motivation to save more money each month. You can even create separate “Jars” for specific goals, such as saving for a new iPhone or a holiday to Goa.
6. Keep liquidity in check
In today’s consumer-driven society, it can be all too easy to fall into the trap of impulsive spending. We find ourselves tempted by flashy advertisements and irresistible sales, often leading us to make impulsive purchases that we later regret. But fear not, for there is a solution to this common problem: allocating some of your savings into accounts that are less easily accessible. One effective method is to consider investing your money in fixed deposits, retirement funds or Peer to Peer investing.
7. Automate Your Savings
Making a conscious effort to set aside some of your hard-earned cash for a rainy day can be challenging. The easiest approach to saving money each month is to remove the choice from your hands. Automation can be a great way to save money effortlessly, from setting up periodic transfers between accounts to using simple applications. With Monexo Grow, for example, you can have a fixed amount deducted from your account every month, allowing you to save without any worries.
Conclusion
While budgeting, saving, and investing might seem daunting at first glance, they are actually quite manageable. In fact, they are the most powerful tools you have to secure your future. Some may argue that life is too short to worry about what lies ahead, but it’s always wise to be prepared for any unforeseen circumstances. By taking control of your financial situation now, you can ensure a more stable and stress-free future for yourself and your loved ones.
Indulge in some well-deserved fun but remember to be mindful of your financial future. Make it a habit to set aside a portion of your salary into a dedicated savings account. By consistently saving, you can enjoy peace of mind knowing that you have a solid plan in place to grow your money and achieve your financial goals.
