Saving first then spending the rest is said to be the basic and necessary principle for saving money.
1. Change your money mindset
Our beliefs about money influence our actions. Before you can save money, you must have faith that you can. “If you subconsciously believe you can’t do it, you never will,” said Amanda Abella, founder and CEO of Make Money Your Honeysaid.
That’s why Abella encourages people to seek out information on wealth consciousness and the money mindset. From reading books like Think and Grow Rich By Napoleon Hill, by listening to podcasts about finance, you can form the belief that you can be rich and financially stable.
Souffrant, a financial education instructor, says that shifting the mindset to “I’ll save first, then spend what’s left, instead of vice versa” is fundamental and necessary.
2. Must have a budget
If you don’t know how much you’re spending relative to what you’re earning, it’s difficult to make any financial progress. “A budget or spending plan is useful because it gives you an inventory of your habits: what you spend on and where the budget leaks,” explains Souffrant.
This expert recommends recording spending for 2-3 months using a book, spreadsheet or an app. View your account statement to determine the amount spent for each item. From there, you will know where the money is leaking and have a direction to adjust.
3. Set clear goals
“Set your goals as specific as possible,” advises Dr. Tanya Ince, a money expert and business consultant.
If your goal is a trip abroad, estimate the total cost. When it’s clear, you’ll know how much you have to save and how long you have to save it.
Ince recommends printing a photo of the car or tourist destination you want and sticking it on the refrigerator door or computer screen to remind yourself every day.
“If we have too many goals, we get overwhelmed and make poor financial decisions. That’s why it’s important to choose one or two as the top priority. If it’s important It’s important to save for a house, but to give up the trip, and don’t be sad because you can always satisfy yourself with a less expensive alternative.
Many people want to save, but often spend first, how much is left to deposit. As a result, they rarely achieve their goals. To be efficient, automate. Set to automatically transfer to a savings account as soon as your salary comes in. You can choose the number that works for you each month.
“When the savings are automatic, you won’t have to think about it,” says Souffrant.
5. Start small and be consistent
“Research shows that people increase their savings over time. The hardest part is getting started. So start small and save often,” encourages Ince.
Many people say “I work hard, I deserve this. Life is short and I can’t take money to the grave”. But the point here is not whether you deserve something or not, but need to understand time once gone. If you save small amounts, you can still enjoy life.
“Saving money doesn’t have to mean fasting. Long-term goals like buying a home or traveling internationally may seem far-fetched. But if you save consistently over time, you’ll get there. that,” Souffrant explained.
This is like going to the gym, the belly won’t be flat all of a sudden. But if you practice for a whole month, you will see a difference. Get started and be consistent. My future self will thank you. “Commit to increasing your savings by 1% every year,” suggests Ince.
6. Identify the best places for funds
Putting money into a savings account isn’t always the most lucrative option. Souffrant explains that where you put your money depends on what you need it for.
If it is an emergency fund, it should equal 3-6 months of living expenses and should not be deposited in savings but should be kept in cash to be taken out at any time. This fund is not only used for negative situations, but the extra money also allows you to get surprises, such as travel or taking a course.
In addition to this fund, there are retirement or investment funds. If you’re saving for short-term goals, consider mutual funds, or retirement that will receive higher interest rates.
Investing in stocks is riskier but much more profitable, and over time, than a savings account, says Souffrant. So don’t invest the money you need next time.
And Abella recommends opening different savings accounts with names labeled to represent your goals: money to buy a house, travel abroad, etc.
7. Increase income
For extra income, ask for a raise, work overtime or do a side job. “For people who don’t have a huge disparity between spending and income, there won’t be much to save. In these cases, focusing on increasing income is the best strategy,” says Abella.
It is important that you have money from different sources. Whether it’s freelancing, becoming a social media influencer, or selling items you no longer need, you can save even more money.
8. Looking for a Companion
Just like changing any habit, sticking to a savings goal isn’t easy. Finding someone or a group to hold you accountable to can make a difference.
When you have someone to support you on your journey, you are more likely to stay motivated and get to your destination. You can also listen to podcasts, join a savings group, or read inspirational material to help you stay focused and motivated. If the people around you haven’t changed, connect with online groups and resources that will help motivate you.
9. Start now
“The longer we wait, the more money we lose. The power of time and accumulation is enormous. The difference is hundreds of thousands of dollars,” Ince said.
If you start saving now, the interest will not only accrue on the initial amount, but the parent interest. Example: If you start saving $300 a month at age 25 and do it consistently, by age 65 you’ll have accumulated a million dollars (assuming an 8% interest rate). If you start at age 35, saving the same amount every month at the same interest rate, you’ll only have $450,000 at age 65. If you start at age 45, the amount drops to $178,000 and at 55 will only is $56,000.
But don’t be discouraged if you start late because it’s better to have than nothing.
Bao Nhien (Follow Healthyway)