Sometimes the hardest thing about saving money is just getting started. This step-by-step guide can help you develop a simple and realistic strategy, so that you can save for all your short- and long-term goals.
It is much easier and more enjoyable to take the income, the money we have earned and worked hard to receive, and spend all of it every month — purchasing whatever we want and not thinking about the future. The problem, when it comes to money, is that we just aren’t planning and putting away enough. Saving reduces stress and anxiety about our money — it results in flexibility in life and greater freedom to provide for ourselves and our families, both now and in the future. Everyone comes to a stage in life where we realize we need to save some money for the future. We have dependents, family, dreams and various other reasons to save money for. But a lot of us, especially the younger generation is unable to do justice to this. Reasons could be the attractive shopping offers online, new restaurant that has opened close by or say a short weekend getaway. You know it better. In order to start saving you need to develop the spirit of saving within you. Here are few pointers that will help you develop the habit of saving
1. Make a Budget
The first thing you need to do is have a budget and stick to it. This includes being realistic about your household financial situation and setting honest and attainable numbers corresponding to your spending so that you can save. Saying you will save and thinking about saving is not enough. You will have to be intentional about what you do with your money.
2. Understand the Concept of Cash Flow
You need to understand cash flow: what it is, how it works, and what your personal household outgo looks like. Review your income and expenses and see where your spending habits lay. Be intentional about making changes to things you can in order to have money available to save.
3.Determine your financial priorities
After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings. For example, if you know you’re going to need to replace your car in the near future, you could start putting away money for one now. But be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs. Learningcan give you a clear idea of how to allocate your savings.
4.Determine needs versus wants
Do you need to eat out every day for lunch? Do you need that gourmet cup of coffee in the morning? By bringing your lunch to work a couple days a week, you can save hundreds of dollars a year.
5. Start with a specific saving goal of building an emergency fund
Popular widely-followed personal finance experts like Suze Orman, Clark Howard, and Dave Ramsey all have the same advice for starting off. Choose and then achieve the goal of saving a specific amount of money for emergencies. For instance, Dave Ramsey’s first baby step is to save $1,000 while Suze Orman recommends a higher target, saving enough money for eight months of living expenses.