Being more financially secure in the future by saving is a trade off to spending money in the present. To be considered financially secure, one should save atleast six months worth of expenses and while talking about savings, it’s the portion of income not spent on current expenditure. The most effective strategy of saving is by paying oneself first which helps one to choose saving over spending i.e money should not be viewed as what’s remaining after current needs and wants have been satisfied. If one understands clearly what they are giving up in exchange for the benefits of saving money, then their saving goals will become more attainable and realistic.
There are a number of ways to begin saving money like:
Building your emergency fund– this is a cash reserve specifically set aside for unplanned expenses. It reduces the chances of one adding to their debt with each financial obstacles they experience and reduces the chance of impulse buying. This fund should be set three months worth of living expenses but you can start with what you have.
Pay off your debts early– the longer you carry money balances the more interest rates it will cost. The individual debt repayment strategy will vary based on what type of debt you have for instance credit card debt but either has two methods of repayment i.e the showball method which involves listing your debts by total amount and paying off the smallest ones first and the avalanche method whereby you rank your loans based on the interest rates and paying off the ones with the higher interest rate first.
Stick to your list – this is basically having a plan and the moment you spend money outside what’s in your plan you spending it on something you didn’t plan for and the list should be made in the order of priority.
Create a budget – this will help you to figure out how to meet both your short term and long term financial goals. You have to know what you working with, your commitments and what you have remaining to devote to your financial goals. If your income is less than your commitments, that shouldn’t be a worry for you can find a way to trim the expenses.
So basically as you accumulate savings your financial worries should reduce as long as you’re living within your means and finding the best savings account is key to making sure that the money you do put away earns you the highest interest.
Once you’ve paid 3-6 months worth of expenses in the emergency fund, you can start saving money in a tax advantaged retirement account which will allow you to invest in the stock market and you won’t have to pay any taxes on those investment gains and this will help your money to grow even faster.
Saving money is incredibly important as it gives you peace of mind, expands your decision options that have effect on your quality life and gives you the retirement option.
