Most of us have only been saving money using word of mouth. Is that enough? I wouldn’t blame them because saving can be difficult for some people. However, you need to look beyond what you are sacrificing and see what you could end up gaining. Is it that holiday you want? Is it that new Flat screen? Saving is about playing the long game in money. Here are 6 tips that will help you launch your savings.
1. Eliminate Debt
You need to get out of debt before you could save. Economists call it to break even. Breaking even is a point in your finances where your costs (debts in this case) and your revenue are at balance. For example, in a business when the profits and costs are equal, the break-even point has been reached. You need to make a major decision when you get to this point. You can either wallow back into dept or swim towards financial freedom through savings.
2. Budget and Record Your Expenses
Set out a budget that you will follow. You can categorize your budget according to your needs and expenditure. For example, you could have a household budget that includes transport, food, clothing, entertainment etc.
You need to keep track of your expenses for you to get to a point of break-even. Include every little expense and categorize them. For example, you may use categories like miscellaneous, household, travel, etc.
In this digital age, you can rely on apps that track your spending. Some of these tools can be linked to your debit or credit card.
3. Find Ways To Minimize Expenses
How high are your expenses? Once you record your expenses, you will be able to establish the ones you can eliminate and the ones you need to keep. You can use some of the examples below to minimize your expense:
- Reduce the number of times you eat out.
- Cancel memberships and subscriptions you do not need.
- Minimize impulsive purchases.
- Try to get the best price for your purchases, for example, low-cost entertainment.
4. Set Savings Goals
Your savings goals can be either long term or short term. It depends on what you are saving for. You should start with short term goals. They will be psychologically rewarding and you will be motivated to try for the long term goals. Examples of short term goals are saving for a flatscreen TV, a wedding, a gift etc.
Examples of long term goals include retirement, your child’s education and home renovation among many others.
5. Pick Your Priorities
You should not let your short term goals overshadow the long term ones. Always consider them. For example, you would not want to be short on your retirement money as it would mean you will have to come out of retirement.
Prioritizing will let you know where your saving starts.ask questions like, what is the more urgent need? The urgent need will mean it gets a bigger share of your savings. For example, car savings are more urgent than retirement savings. This means you will apportion more for the car savings at the moment.
6. Pick The Right Tools
Currently, you have many saving options. You can use mobile saving platforms such as M-shwari among others. However, your saving tools depend on your goals.
- For short term goals, consider opening a savings account or a locked savings account.
- For Long term goals, consider individual retirement accounts or securities such as government bonds, mutual funds or stocks.
You can use multiple saving accounts and tools. However, consider various factors such as interest rates, fees and balance minimums of the account(s).
7. Start Saving.
The last step is distributing your money to your various savings goals. For example, you can open that savings account or piggy bank account. Make it a habit and see how far you can reach.
Are you ready to get started?