Saving is an excellent habit that you must inculcate early on in life to ensure your financial security.
Major reasons to save money include:
To have an emergency fund to cover unexpected expenses such as a medical emergency or an unexpected expensive repair for your home or vehicle. The rule of thumb is to put away at least 3 to 6 months' worth of expenses, in an emergency fund.
To have a retirement fund to take care of your day-to-day expenses after you retire. Most experts recommend an annual retirement savings goal of 10% to 15% of your pre-tax income.
To make a down payment for your home or other big purchases
To pay for your children’s education and marriage
Saving is crucial. This is much easier said than done. It is not uncommon for your short-term happiness to override your long-term goal of saving. To be able to save, you need to be firm with yourself.
Here are some steps to start saving:
Estimate your current sources of income and the total amount of income.
Set aside 50% of income, required to run your household and meet other necessary expenses.
Earmark 20% of income for expenses to be incurred on shopping, outings, and other activities.
Mark the rest of your earnings as your monthly savings.
Set a tight budget for yourself and operate within the budget at all times, barring a few unavoidable exceptions such as a medical emergency.
Sometimes the hardest thing about saving money is just getting started. These tips can help you develop a simple and realistic strategy, so you can save for all your short- and long-term savings goals.
Set saving goals
Start by thinking of what you might want to save for—perhaps you’re getting married, planning a vacation, or saving for retirement. Say you were saving for a £400 emergency fund. You could save £100 a month for four months, or £50 a month for eight months. It’s a balance between what you can afford and how long you want to save for.
Create a monthly budget
You can’t save if you don’t have any idea of where your money is going. So, first things first, you’ve got to get a budget. Try using the TimelyBills app to set and manage your budget. It is designed to do all the hard work for you! No receipts, no formulas. You just get to track your spending at the touch of a button.
Make savings automatic
Banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money or even split your direct deposit so a portion of every paycheck goes directly into your savings account.
Lowering the thermostat on your water heater by 10°F can save you between 3-5 percent in energy costs. And installing an on-demand or tankless water heater can deliver up to 30 percent savings compared with a standard storage-tank water heater.
Bring your lunch to work
With an average work lunch costing up to $10-a-day in a big city, you can end up spending over $2,500 a year on work lunches alone!
If you smoke a pack and a half every day, that amounts to nearly $3,000 a year you can realize in savings if you quit.
Make your own Meals
Instead of buying a club sandwich from the deli near work, buy the ingredients to make your own sandwich to bring with you. Cooking at home is healthier as the ingredients are fresh and do not require any chemical preservatives.
Make your own gifts
Go the DIY route or save money with affordable gift ideas, like herb gardens and gift baskets. You can bake some delicious cookies, make a tasty jar of jam or pickles, or some incredible homemade soap!
Cancel unnecessary subscriptions
Uncheck the auto-renew option on any subscriptions you aren’t using regularly, such as subscription boxes or streaming services.
Compare, your plans and subscriptions
There are often competing providers, all with adjusted rates for new customers. Call and compare, and you could start seeing substantial savings for the items you have to pay for.
I started doing this about 5 years ago, and I managed to save over 50% on my utility bill (that was over $500)!
Saving money is not about depriving yourself, but it’s about being able to spend on the things you truly love and value. A properly inculcated savings habit leads to increased happiness by bringing both financial security and financial independence.