For many people, saving is one of the most difficult things to do. But it is one of the easiest skills to master if you go about things in the right way.
Saving is less about the level of your income or earnings and more about your mindset and systems.
The first rule of money is to spend on essential items and only when absolutely necessary.
Once you master that first rule, ending up with the maximum amount of unused earnings or income – you can benefit from the second rule:
Save what you don’t spend
Here are the four key features of the rule:
- Save everything you don’t spend
- Save at the earliest stage
- Make it hard to get at your savings
- Look to grow your savings by earning interest during the saving period.
Save every penny you don’t spend. Avoid the temptation to use part of your spare income to “reward” yourself for your hard work in creating unused income!
It’s pointless amassing spare money if you simply spend it subsequently.
Save at the earliest stage – good practice is to set up a standing order once you have a rough idea as to how much you will be able to save each month.
Set up the standing order to apply immediately after your monthly income is received into your bank account.
If you have extra to save in a particular month, manually transfer that to your savings account.
Savings should be put out of harm’s way. Simply keeping them as a reserve in your current account is practical but it does make it easier to use them and destroy all your hard work.
It is better to put your savings in a separate account.
You should look to grow your savings by depositing them in a bank or building society account – seeking out accounts paying the best interest rates.
Saving for a fixed period gives you some of the best interest rates and any penalty for early withdrawal should deter you from touching your savings.
If you have unsuccessfully tried to save in the past, identify what went wrong and address the issue.
A big problem for many people is that they save without a clear and definite reason for doing so.
This lack of a clear purpose makes it easy to draw on savings for some or other “good reason”.
It is best to save for a specific reason and you should set:
- Your savings target (the exact amount) and
- The date by which you expect to reach your target.
This approach should make it less likely that you will randomly use your savings and spoil all your efforts.
The third rule of money is to invest your savings to achieve the highest possible return. That however is the subject of another blog.
How easy or hard do you find it to save? What tips would you give to anyone trying to save? Please leave your questions, observations or comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com
Categories: 01 Finance