Saving money for financial goals and other humans’ big life goals early could make a difference in how individuals perceive life.
When financial problems are prioritized and resolved early, individuals have peace of mind, and the human orientation of life becomes positive.
Saving money is not an easy task–it requires discipline and dedication. However, setting a financial or a life goal can motivate you to start and continue saving money.
The following steps will guide you into saving money for your financial and life goals.
Table of Contents
- Earning and Expenses
- Set Money Goals in Terms
- Pay Off Debts and Loans
- Start Early Savings
- Money Saving Tips
Earning and Expenses
The first step in saving is to look into how much money you bring in and compare it with your expenses; let’s call it personal finance management.
Your earnings should always exceed your expenditures to stay afloat in life’s misery-world. Paying interest on spent money is debt allocation and shouldn’t be encouraged in all circumstances.
Tracking your expenses is a good way of organizing your finances. Knowing where you spend the most money up to the least money will give you the means of cutting unnecessary spending and having some money for savings.
Expense trackers such as Mint, GoodBudget, and Expensify are suitable mobile applications for monitoring expenses.
Set Money Goals in Terms
As mentioned earlier, saving money is not easy; it requires discipline and dedication. However, setting a financial or a life goal can motivate you to start and continue saving money.
Specifying money goals into short-term, mid-term, and long-term give a more precise target to pursue and accomplish in realistic timeframes.
- Short-term financial goals can take between one month through one year to accomplish. Examples of short-term financial goals could include: Emergency Saving Fund, Vacation Savings, Paying Down Loans/Debts, etc.,
- Mid-term financial goals can take between one year through five years to accomplish. Examples of mid-term financial goals could include: Car Buying, Paying Off Debts/Loans, Starting Side Hustle, etc.,
- Long-term financial goals can take five years or longer to accomplish. Examples of long-term financial goals could include Retirement Savings, Home Buying, College Funds, etc.,
Pay Off Debts ASAP!
Although paying off debts is in the mid-term goals, paying down debts as quickly as possible is highly encouraging, just as stated in the short-term goal.
Paying interest on spent money is debt allocation. Interest rates on owed debts are the number one impoverishing system you want to get out of your life as quickly as possible.
Firstly, eliminate all large interest-rate debts, such as Credit Cards that mostly range between 15%-35% interest, and trickle down to your least interest-rate debts, such as Car Finance and or Home Mortgages that mostly range between 0%-10% interest.
Start Early Savings
Compound interest is arguably the best mathematics subject taught in schools. The undeniable magic trick of compound interest makes early savings worthy of it.
Compound interest is the interest earned on interest; this is not double dipping. However, it allows you to profit twice on your hard-earned money.
- For example, if your initial investment was $500 and earns 6% interest each year, you’ll have $530 at the end of the first investment year. At the end of your second investment year, you would have had $561.80.
- Note: Not only did you earn $30 on the initial $500 deposit, but you also earned $1.80 on the $30 in interest.
Try this compound interest calculator for a better understanding.
Money Saving Tips
Some unnecessary bills seem too important to let go of, even while struggling financially; however, with the right mind and determination to save money, you will find it easier to drop all minor expenses.
- 30-Day Rule: Every financial purchase must be decided by thinking through it. This saving rule urges consumers to take a break from purchasing items for 30 days. Delaying your decisions for 30 days allows you to consider alternatives and evaluate if you need the products.
- Cancel Subscriptions: Some call it the digital age, while some say it is the new media age. But one thing is shared, the age is full of subscriptions. Netflix, Google, Amazon Prime, Spotify, Apple TV/Music, etc., have monetary obligations.
- Do It Yourself: The other good thing about the digital age or the new media age is the ability to learn to do things easily by watching videos on YouTube, listening to a podcast, e.t.c., rather than paying someone to get the job done.
- Lower Bills: Some important recurring bills, such as electricity, internet, and phone, can be lowered if negotiated. Minimizing using big electrical appliances, e.g., washing machine, during the day will reduce your payments.
Bottomline
Life can be unpredictable and uncertain, and sometimes life throws at us unexpected expenses. It’s encouraging to save at least 10% to 15% of our paycheck each pay period for unforeseen circumstances.
More so, it is highly recommendable to at least practice the “50/30/20” savings strategy, i.e., Set aside 50% of your paycheck for your needs, 30% for your wants, and 20% for your savings.
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