Saving can be such a daunting task, you have probably tried planning a budget –even going as far as setting up an excel sheet or cutting back on your purchases here and there, but nothing seems to help you save better as much as you would want. Hey, it happens. But it’s likely there are some money-saving strategies you have yet to consider.
Bonus Tip; Don’t just save your income in a bank account, make sure to invest your savings. Investment is one of the best ways to grow and amass wealth. You can start from small investments depending on your risk tolerance level – click here to get a personalized investment guide.
Now there is no outright rule that says you mandatorily have to save 40% of your income. You can choose to save more and you can alternately choose to save less –this is determined by the level of responsibility you shoulder.
If you plan to work from your early twenties until you are past your retirement age –60s to 70s years, then you need not worry about saving up to 40% of your income. But if you wish to attain financial freedom early, where you get to a point you do not have to work anymore and your money does all the work for you, then these saving steps are for you.
Saving this percentage of money from your income on the plus side, affords you the luxury of getting to a point where work becomes optional by the time you get to 50s or 60s, or when you have huge projects to fund in the future — depending on the lifestyle and expenses you wish to operate in.
Oftentimes, the hardest thing about saving and investing – actually any endeavor- is just getting started with it.
These are 5 key steps to get you started in boosting your chances of successfully saving money. Not just for your short-term goals, like rents or buying a new car, but your long-term goals as well.
This step-by-step guide would enable you develop a simple and realistic strategy towards achieving your set saving goals.
- Draw a visible line between Needs and Wants
The first step towards saving is to separate your needs from your wants. Needs and Wants are terms that are often used interchangeably but are not actually the same. There are distinctive differences between what you need and what you want.
A need is an essential that is necessary for your survival; a want is a desire that is not essential for your survival.
|NEEDS VS WANTS|
|Essential For Survival||Non-Essential for Survival|
|Can Remain Constant||Can Change Over-Time|
Take a note pad and list those liabilities that are unnecessary wants. Know how much you need to spend not how much you want to spend.
If you are uncertain on what items fall into needs or wants, all you have to do is to ask yourself this question “can I survive without this item?” If it is a necessity, the answer would be no and if it was a want, the answer would be yes.
- Place a standing order on your account
Once you have identified and separated your wants from your needs, the next step is to device a means to begin saving. If you are the type that only remembers to save after removing your expenses, placing a standing order on your account is the best step for you to take.
A standing order is an automated payment system that is set up by you through an instruction to your bank, which allows them to automatically deduct a fixed amount of money from your account on a specified basis – either daily, weekly or monthly. What is then left after deduction becomes your source for expenditures.
This method of saving ensures that you cultivate a saving habit.
- Invest! Invest! Invest!
Saving money is very crucial but it is only half of the pie. For you to create wealth and build ample emergency funds, you must ensure that your money is creating more money. Give your money a job and let your money work for you to ensure financial independence either for long-term or short-term goals. Never let your money sit idly in your account, always ensure it is amassing more money.
Investing in Fixed deposit, is a viable investment option which limits your access to your income and liquidation before maturity date would ultimately attract a penalty of up to 20% on the accrued interest. This would condition you into dipping less into your savings. Investing can be essential towards financial discipline through savings i.e., a Target saving account that enables micro-clients save towards specific projects or events with ease.
There are also long tenured investments that carry stiff penal charges for withdrawal before the stipulated time of withdrawal. Click here to find out which investment methods best suits you.
- Alternative streams of income
Alternative streams of income, also known as passive, secondary or multiple streams of incomes can be referred to as an extra level of financial security. When you have other sources of income, you do not rely solely on your 9-5 paying job to secure you for the foreseeable future. There is the potential of salary cuts, being laid off, or business closure; so, you must avoid putting all your eggs in one basket.
Now, how do you do this?
- Diversify your portfolio; Always ensure to diversify your portfolio as much as you can. Mix a wide range of investments in your portfolio to yield higher long-term returns and lower the risk of any of your individual holdings.
- Develop a sellable skill: Time they say is money; rather than spend wastefully on desires, spend time improving and developing skills that are sellable. For example; freelance writing, virtual assistance, graphic and web design etc. Offer those sellable skills as services. This can prove to become a “side hustle” for you or a fallback job on the long term.
- Create a product that solves a problem: Look for a problem that consumers have or do not even know they have; their unmet needs, then create a product that solves that problem and provides value to the consumers. Sell an idea, make it a profitable product.
For you to achieve the steps outline above, you must be financially disciplined. Saving and investing your income requires a high level of discipline and patience to boot. Financial discipline pays off in the long term. Aristotle once said “we are what we repeatedly do, excellence, then, is not an act but a habit”. Achieving the goal of saving up to 40% of your income means you have to develop the habit to maintain this for a long term until it becomes second nature. Make sure to;
- Create a financial plan/budget
- Set goals
- Motivate yourself by visualizing these goals
- Be accountable for your spending
- Engage the help of a finance managing company that is regulated; where you are certain your funds are secure. Capitalfield Asset Management Limited offers fund and portfolio management services tailored to your specifications.
In all, saving 40% of your income is not as easy as it sounds, but it is more possible than you think. It takes consistency to follow the process duly and manage the whole process effectively.
You need assistance achieving the level of discipline you desire or want to ensure the proper management and investment of your finances, visit Capitalfield Financial Management Limited.