There’s no one among us who does not like to have more money. Becoming rich is one of those things many of us dream about; waking up with no financial worries, no mortgage, no credit card debt, and so on.
Developing good financial habits in your 20s and 30s is the key to having a rich financial future. Savings today are what guarantee the security and the possibilities of tomorrow.
One of the smartest things that you can ever do for yourself is to develop the habit of saving part of your salary, every single paycheck.
Here are 7 ways to save now so you're rich later.
Make a budget
Budgeting helps you prioritize your expenditure and find a balance between spending and saving across a whole year.
If you want to make sure that the budget you land on is something that you can easily understand without pulling out your hair. Something that could work for you and is super easy to follow is the 50/30/20 budgeting rule. Allocate 50% of your income to necessities like food, utilities, housing, and health, 30% to wants such as dining out, entertainment, etc, and the remaining 20% towards debt and savings.
And if you’re looking for a budget that is a bit more specific and gives a plan for every single dollar, the Zero-Based Budgeting Method may be the one for you. This method is the best for someone who has never had a budget because it gives every penny a place to be and can really take a lot of the guesswork out of budgeting.
Budgeting is one of the best things you can do. It will make a plan for your money and make your money work for you which means you’ll be under continuous financial improvement.
Track your spending
It’s important to keep track of your day-to-day spending, so you don’t live beyond your means. Your bank statement will tell you how much money is going into your bank account and how much is going out.
You can then compare it with your budget to see whether you’re sticking to it or not.
Smooth your bills
Bill smoothing’ is a payment system offered by utility providers (electricity, gas, water) whereby you pay them fortnightly or monthly, instead of having to pay the whole bill in one go.
This allows you to save money over time to pay for certain bills annually– taking advantage of discounts for paying bills and premiums in one hit rather than in installments.
Start Meal Planning
Wasting food and eating out are two of the biggest money wasters. You’re never going to have a ton of money in the bank if you’re constantly spending your money on food that you aren’t even going to eat.
Meal planning is one of those things that you need to develop early if you really want to make it a habit that will stick.
Choose a Modest Place to Live
Did you know it’s not recommended to spend more than 25% of your take-home income on your house?
A lot of people seem to think that if they can’t afford their dream home by the time they turn 25, they are a failure. However, most of us won’t be able to afford even half of our dream home by 30, so stop rushing!
You don’t want to end up being house poor and having no money to put toward savings or investing.
Say ‘no’ to your children sometimes and teach them about money
Even if you can afford to buy, it is good to deny your children what they want once in a while. Children need to learn and understand the value of money. Have age-appropriate discussions with your children, ensuring that all conversations about money are framed positively.
Open a savings account
Savings accounts can give you a higher interest rate than a basic transaction account.
Savings accounts are somewhere you can put some or all of your discretionary income – the amount left over after paying for personal necessities and tax – and any windfalls (e.g. tax refund). You can ward off the temptation to spend this discretionary money by setting up automatic, scheduled transfers from your main account (transaction account) to your savings account.
Personal finance doesn’t have to be scary, it can be simple if you just take it one step at a time. Start by making the small changes that will make no difference to your current lifestyle and then push yourself that step further to become more frugal with your earnings. With the right habits, you can become super-rich.
If you can think of any other financial habits that can kick-start your journey towards wealth, let us know in the comments below.