If you’ve just started working and earning your own money, you will find life change in many ways. Financial independence is a power that we all want to have because it allows us to not be a burden on anyone. We also don’t need to lay our hands in front of others and ask for things we want. Being self-sufficient is great, but it does take time to realize the need to save money.
When we initially start working, we tend to spend all the money we earn. The surety of having our bank balance filled by the first week makes us use it all up. But we fail to realize that people don’t become rich with what they earn but with what they save.
The start to save money
Just like exercising and eating healthy to lose weight, saving money can be difficult. The start to something credible is always difficult to most of us, isn’t it? Follow the guide below to know simple tips to save money and have a realistic plan for your small or big goals:
1. Keep a track of your expenses
We understand that it can be difficult to find ways to save money on a tight budget. Initially, most of us have less earning and a lot of expenses. For example, say you shifted to another city because you got a job. You have rent, electricity, water bill, phone bill, and many more things to pay off.
The first step to save money is to know your fixed costs and put them aside. You cannot do anything about rent charges, EMI, as they have a definitive amount. You can, however, curtail the variable expenses like electricity, commuting, groceries, which you’re probably paying more than you should.
Until you track all the expenses you have, you wouldn’t know what to curtail and what not to. Tracking the expenses helps you make a budget and abide by it.
2. Make a budget
Once you know where all your money goes in a month, you can organize and record the expenses you have. It helps you create a workable budget and outline expenses. When you measure up your income, you can plan on how much you can spend and where to draw the line.
Along with your monthly expenses, there are unforeseen costs that you might come across. These can be maintenance costs, car servicing, repairs, and so on. You need to keep a budget for such things as well, so that you don’t need to break your savings to pay these off.
3. Start saving money
Once you have the budget, you will need to make saving categories to put in money. Every new earner must start by keeping aside 10% to 15% of what they earn. If your expenses are too much and you can’t keep that much away, you need to find ways to curtail costs.
You need to identify the things you can do without and spend less on. Things like entertainment, eating out, fancy clothes, are some of the things that you can lessen. Try to consider going low on regular things like groceries, keeping the AC on for too long, keeping the engine off in traffic, and more.
4. Make a goal
When you have a goal to achieve you have more determination than working randomly. For example, if you have a project to complete and you know when to submit, you’d know when to start working on it and how to do it. If you have all the time in the world, you will never finish.
Similarly, if you think you can wait until next month to start saving, you’ll never start to save money. You need to have a constructive goal that makes you save. It could be a lavish wedding, a foreign tour, a house, or simply a monetary goal for your bank balance.
5. Know your priorities
After your income and expenses, your goal will leave a huge impact on you to allocate savings. You might surely have short-term goals like marriage, buying jewelry, and things like that. But you also need to consider long-term goals like retirement savings, healthcare, child’s education, and more.
You need to prioritize your savings and have a clear idea of how you want to go about it. You need to have an idea of your goals and how you replace saving for a car with a retirement plan. For example, you might save for a year to buy a car or five years to buy a house. Once your short-term goal is achieved you need to think about long-term ones.
You can also start dual savings that let you add a parallel amount to two types of goals. For example, you can add 10% of your salary to short-term goals and 5% of your salary to long-term. This way you not only save more but also get closer to your goals.
6. Know the right tools
From taking help of saving apps on your phone to making fixed deposits in your bank account, there is a lot you must do for your saving goals. You must have a savings account that you only keep to save money and not withdraw. Look for banking schemes for retirement plans, marriage plans, home loans, tax savings, and other things. If you want to have securities like stocks or mutual funds, you must consider those too. It is always good to find ways that multiply your savings and make the amount grow gradually.
7. Automate savings
You can give yourself 101 reasons why you need to put your hands into your savings money, so automating it is best. It doesn’t give you the scope to make an excuse and transfers money from one account to another anyway.
It helps you decide when and how much you were to transfer money or split it according to your budget. The process also makes you think like you don’t have that extra 10% of your salary as you don’t get to touch it at all.
8. Keep a note away
One smart way to save money is making a point to not use a particular note. For example, if you decide to never spend a $20 note on anything, you’re forced to put it aside and keep it into savings. It works best when you want to have a piggy bank at home and add $20 to it every time you get one.
Now that you know how to save money from salary, you can keep a lot of it aside and only use what you need. You will soon find your savings grow and have a higher net worth than you ever thought.