Most people often ignore how important it is to save money. By putting some of your monthly earnings aside, you can ensure that you will always have enough money to pay for medical procedures, to go on holidays and to almost always be able to buy anything you want. Furthermore, saving money over time can help you eliminate the need to take out loans or to use credit cards. It can even make your retirement completely carefree, as it should be.
Unfortunately, saving money can be difficult, especially if you don’t know how to properly manage your finances. While there are a few methods that you can use in order to save money more efficiently, the most important thing to remember is that you need to have discipline. As many find out, having a lot of money saved up makes expensive products much more tempting. If you want to start saving, avoid using the money that you put aside for as long as possible.
This having been said, here is how you can be smart about how you save your money:
Open a savings account
Savings accounts are extremely useful tools, especially when factoring in the compound interest that you will earn from one year to another. They are also great at eliminating the temptation of using the money that you’ve saved up. Generally speaking, savings accounts can be used for any purpose or period of time, but they are only truly useful if you intend to make monthly deposits for at least 10-15 years.
From a functional point of view, savings accounts do not have any activation, administration, or closing fees, so it won’t cost you any money to open one.
Set goals for yourself
In order to efficiently save money, you will have to set goals for yourself. Look at how much you earn every month and decide what amount of money should go into the account. For example, if you make £2,500 per month, consider making fixed £500 deposits. While it is great if you ever manage to deposit more money, make sure that you never miss your goal.
Making fixed monthly deposits serves two purposes. First, they make it easy to calculate your compound interest. This way you will always know how much money you have to receive each year. Secondly, it will create a habit that will make it easier to reserve money out of your monthly income.
Prioritise saving money
Make a habit out of making your savings deposit immediately after your salary is paid. This will ensure that you do not get the chance to spend the money on other things and will also help you budget your income more easily.
Use apps that help you save money
There are several apps that you can use to round up the cost of your purchases and help you put the extra money aside. These apps are great because they do not affect your spending habits and the amount of money that is moved with each purchase is so small that you won’t even notice it.
Saving money is usually a long-term commitment. Furthermore, the more time you spend making regular deposits in a savings account, the more profitable it will be in the long run. Whether you use apps to help you save money, open a savings account, or simply put the money in a jar, it is important to resist the temptation to spend it.
Always set a purpose for your savings and never spend the money unless it is for that purpose. For example, if you want to put money on the side to purchase a home, do not spend the money on anything else.