Bad financial decisions could leave you eating ramen noodles in your apartment, thinking about your bad financial state, and crying at the same time.
The truth is making money is not so easy and spending it is all too easy.
Saving money protects you from such situations: when you have a sizable stash you are less likely to worry so much about unbudgeted expenses and bad debt.
In general, saving money means setting aside a portion of your income for future use. Your savings could be cash in a safe or piggy bank, deposits in a savings bank account, or part of an investment fund. Simply put, the money you save is the difference between your income and expenditure that you put aside to use in the future.
People tend to save towards different goals: unexpected bills, a house, a new business, school fees, a vacation, a car, or even a new technological device.
However, the most profitable form of saving is saving money for business or a legitimate and safe investment. This doesn't mean that saving money for a vacation or car is bad: you may close better business deals on that vacation or with that shiny new ride.
Irrespective of what you plan to use your savings for, saving money is important for achieving financial goals.
There are different ways by which people save money and reduce personal expenses. They vary based on the individual, environment, and financial system in their region.
1. Use Coupons and Cashback Offers: For grocery shopping and online shopping, using coupons and cashback offers is a great way to spend less and get more value for your products. Although checking for coupons and cashback offers may seem stressful, applications like Shopkick, Drop and Capital One make the whole shopping experience easier and cheaper for you.
2. Stop Eating Out So Much: It may seem fun to eat out by yourself and with friends, but restaurant bills could pile up to a large sum in the long run. Invest your time in the kitchen more often and watch your savings grow from child size to six-foot adult. On days you want to eat out, have a set limit on the money you can afford to spend and do not exceed it. Unless, of course, someone else is paying for the food.
3. Budget and Track Your Expenses: Budgeting is not only for people who work in the finance industry, it is for everyone. Having a flexible but strict budget helps identify your splurging and plan for the future. Writing down your expenses may help you realize that you spend 40% of your income on food or that a large chunk of your income is spent on clothes. When you document your expenses, you can identify the unnecessary costs and eradicate them. Applications like You Need a Budget, Pocket Guard and Zeta are great for budgeting while applications like Mint, Expensify, and Personal Capital are great for tracking your expenses.
4. Set Clear and Achievable Saving Goals: If your annual income is $50000, setting a goal to save $48000 yearly would be very difficult. When you set goals that are not achievable and clear, you are more likely to be discouraged when your savings plan fails and fall back to your previous bad financial habits.
Have a fixed goal in mind and document in a stepwise manner, how you intend to achieve your savings goal. You can also break down your target into smaller goals: for example, save $5000 in 100 days by saving $50 every day. With little effort, you will achieve your goal of saving money fast.
5. Separate Your Wants From Your Needs: Your wants are things that you crave and your needs are things that are important for you to function. For example, you need food to survive and you want a Hermes bag to look glam for the gram. If you need to pay for your college education and you want a car, your college education should come first. Prioritize your expenses in that order: place your health, education, and wellbeing above purchasing items that you can very well do without.
6. Avoid Bad Debt: Debt is not always the scary monster we paint it to be: bad debt is. Borrowing money for a well-researched business or getting a loan to study for your dream career is great but credit card debt may be terrible for your credit score and bank account.
Borrowing money for Ponzi schemes, gambling or parties may be a strong factor in precipitating bankruptcy. Avoid debts that are not necessary because repayment can eat deep into your savings in the future.
The journey of saving money begins with tiny baby steps. Do not be too hard on yourself if you have never saved or you have not been able to save a tangible amount. Saving money fast may seem like a task only to be accomplished by people that have a lot of money: but that is not the case. If you are bad with money now, it is most likely that you will be bad with money when you are billions of dollars richer unless you decide to change. Make that decision today, ask the bankers in your region for advice, and stay committed to your goal. You can build, and you will build that stash.
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