Saving money provides the key to building wealth and becoming financial independent. Follow these seven tips on saving money to help achieve your dreams.
Step 1: Budget
A budget is really the key to money management. Compile a detailed list of all your regular monthly expenses and spending. Identify where you can cut down and draw up a new budget or spending plan. Before allocating money to anything else, you should PAY YOURSELF. Allocate at least 10% of you monthly spending plan to savings and investments. All other expenses are secondary to paying yourself. Paying yourself first will empower you to the achieve financial independence that is desired by so many and achieved by so few.
Step 2: Take care of the pennies
"Take care of the pennies and the pounds will take care of themselves." The small low cost items that we regularly buy without thinking can add up to a significant sum over a month. Watch what you spend on luxury and impulse items and the savings could be significant. The higher prices at the local quick shop may seem trivial, but the small amounts add up over time.
Step 3: Invest your savings
Your savings should typically be invested in a number of diverse instruments. You should have some liquid savings to cover emergencies. Traditionally, the remainder of your investments should be split between equities, property, and perhaps an interest bearing account such as the money market. Shop around and ensure that the companies that you use to build your investment portfolio are sound and trustworthy. Diversifying your investments helps to reduce the risks.
Step 4: Buy items on special
When shopping, try to buy the items that are on special. This can save you some money, but don't buy items just because they are on special. If you don't need it, then this will just add to your expenses.
Step 5: Get out of debt
Debt is the enemy of savings. Target your debts one at a time to eliminate each. Begin with the smallest debt and work your way through all each debt until you have got rid of each. If you do have a debt problem, then use the "pay yourself" amount allocated in your budget to get rid of debt. Once you are debt free, savings will accumulate much more quickly.
Step 6: Buy for cash!
Use your savings to finance your next appliance, furniture, car and even your house! The interest and finance charges on financing these items adds up to a substantial sum over time. You can achieve substantial savings by adopting the "old fashioned" approach of only buying something when you can afford it! It may take an extra year to get that new car, but you will have saved a lot of money in the process.
Step 7: Involve the entire family to achieve your saving objectives
You will be able to save more if every member of the family buys into the concept. Encourage the children to save for the things that they want from their allowance. When everyone works towards the same goal, you will be able to save much more money more quickly.
The seven tips are all closely related. They all hinge on the need for savings and the goal of achieving financial independence. It may be difficult to begin the process, but once you adopt the philosophy of "paying yourself first" the process becomes easier. As your savings build-up, you will find yourself in a position to pay for what you need (and perhaps what you want!) in cash.
No comments:
Post a Comment