The earlier you start saving, the more time works in your favour thanks to compound interest.
Compound interest arises when interest is added to the principal, such that the interest ? that has been added also earned interest?
Albert Einstein, the great scientist once said “Compound Interest was the most powerful force in the universe.
1 RECORD YOUR EXPENSES
The first step to start saving money is to figure out how much you spend. Keep track of all your expenses.
Once you have your data, organize the numbers by categories, such as gas, groceries, utility bills. Ensure this is accurate and don’t forget any.
2 BUDGET FOR SAVINGS
Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget.
Your budget should outline how your expenses measure up to your income- so you can plan your spending and limit overspending.
Be sure to factor in expenses that occur regularly but not every month, such as car maintenance.
3 FIND WAYS YOU CAN CUT YOUR SPENDING
If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back.
Identify nonessentials that you can spend less on, such as entertainment and dining out. Look for ways to save on your fixed monthly expenses like television and your cell phone, too.
Here are some ways to reduce everyday expenses:
Use resources Such as community listings to find free or low-cost events to reduce entertainment spending.
Cancel subscriptions and memberships you don’t use – especially when it is on auto-renew.
Commit to eating at home.
Give yourself a ” cooling off period”: when tempted by a nonessential purchase, wait a few days. You may be glad to pause -or ready to save up for it.
4 SET SAVINGS GOALS
One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for – perhaps you’re getting married, planning a vacation for retirement.
Then figure out how much money you will need and how long it might take you to save it.
Here are some examples of short and long term goals:
. Emergency fund (3-9 months of living expenses, just in case)
Down payment for a car.
.Down payment on a home or remodelling project.
. Your child’s education
5 DECIDE ON YOUR PRIORITIES
After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings.
Be sure to remember long-term goals it’s important that planning for retirement doesn’t take a back seat to shorter-term goals.
6 USE BUDGET TRACKERS
Embrace digital, and your wallet will thank you for it.
Research has shown that people who actively use digital tools such as budget trackers (or investment calculators) and online transactions save, on average 8% more than people who don’t.