Nobody loves talking about saving, and it has a lot to do with the fact that most articles about saving are pretentious. They set unreasonable expectations on the reader or respective audience and try to oversell the concept of saving. ” I saved my whole salary and I am now a millionaire” – uhm sorry what? How is this practical saving advise for most people whose salary can barely cover their living expenses. These type of article often lead to several misconceptions around saving and how it should be done. So before we go any further it is important that we address the biggest myth about saving. There is a myth going around that saving will make you rich. Contrary to common belief, saving alone will not make you a millionaire , well at least not directly. Saving has a lot of indirect benefits that will contribute towards you achieving financial success, such as being a barrier between you and debt. That said saving should not be mistaken for an instrument that will help you grow your finances , it is not a growth tool, like investing is. Saving is complimentary to investing , but on its own is very limited in its ability on helping you achieve your financial goals.
In spite of what I have pointed out saving should not be regarded in a negative light, it may not be as exciting as investing, but it is a critical component for your financial journey. If you have no savings you cannot have financial success. In order to benefit from saving you have to do it right. The first thing you have to do is remove all barriers between you and saving. To be good at saving you need to be extremely disciplined. Discipline , discipline , discipline, not our most natural calling, it is not easy to be disciplined. The best way to do hard things , is to make doing it as easy as possible. You can do this for your savings, by automating the whole saving process. You can opt to have a fixed amount of your money debited on a certain day to go towards your saving account. This is the best option for so many people. Ideally you should try to make this the same date as you get paid , or a day in close proximity. This way you can pay yourself first, in order to this you need to save money before you spend it.
All the money you save is a payment to yourself, anything else is a payment to someone else, and investment is a payment to your future self.
“Spend what you have left over saving, and not save what you have after spending” – Warren Buffet.
The next important thing that is critical when it comes to saving is that you choose a fixed amount that you wish to save periodically , such as monthly. I am not a believer in setting unreasonable saving goals for yourself, like I will save 80% of my income… Rather start within the scope of reason, and adjust your saving goals once you have a proven track record. You do not want to start with high saving goals, and miss these goals ,and then readjust them downwards, that would be defeating. The ideal amount to save is 10% of your salary, this seems easy enough until it is done. So again I suggest starting small and building up to saving 10% a month.
Now this is all great but how do you restrict your access to your savings. How do you stop yourself from using all your savings to buy junk? You can choose a saving account that does not allow easy readily withdrawals. For example you can have two saving accounts, one to store emergency money, and another one to possess your long term savings. Your long term saving account can be a saving account that requires a notice to be sent to the bank before you with-drawl money or you can opt for an account that is locked for a long period ranging from months to years. You should enquire from your bank which options they have available and how they work. Once you have this information you can choose the banking services that best suit your needs and personal requirements.
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