5 Tips On How to Save Money – Saving money is a big problem for most people, simply because we love spending every penny we earn. let take a look today at 5 tips that will allow you to save tons of money every month. So let’s jump in. Let me introduce to you three my friends, Bill, John, and Brandon Bill is 25 and loves spending money.
He is like most of us, he doesn’t save money because he has a stable job with 36K dollars after taxes that covers all of these expenses, mortgage, car, and the new iPhone he recently bought. As time goes by, Bill gets married and he becomes a father. Now instead of covering only his expenses, he has to cover his child and probably his wife’s expenses as well, but his salary only has increased by 15 percent in the last 5 years.
Now he has to cut down his spendings to be able to pay for all the necessary things. As life moves on, his salary keeps increasing but not as much as his expenses. So After many years, bill decides to retire but he finds that he hasn’t saved any money so he is left with no other choice but to keep working.
On the other side, John doesn’t want to find himself in the position of the bill when he reaches his 60s, so he decides to save 10% of his income, hoping that by the time he is 65, he can stop working and enjoy his life. After 40 years, assuming that his income increases by an average of 3 percent a year, he manages to save 264, 385 dollars. That’s, not enough money to travel the world and cover your expenses for the next 20 years or so, but at least it’s much better than the bill.
Now, our third friend, Brandon who is also 25 and makes a relatively similar income, realizes that saving 10% of his income is not going to make him financially free any time soon and if he wants to see any significant difference, he would have to wait until he is 65. so He decides to take a different approach. Instead of saving 10% of his income, he decides to save 25%, and instead of simply saving it, he invests it into an investment fund. Like his other 2 friends, his income increases by an average of 3 percent.
Assuming that he keeps only investing 9K out of his salary although that his income is increasing every year. In just under 10 years, his savings grow up to more than 150K ($151,093.20). He can withdraw that money and start his own business and maybe retire earlier or he simply can keep it in an investment fund and without saving a single penny for the rest of his life, that initial savings of 150K will grow up to 4.2 Million by the time he retires ($4,246,087.11).
So compare to Bill and john. Brandon will have either retire earlier or have an amazing retirement. What sets Brandon aside from the other 2, is that he knew if he would sacrifice 10 years of his life now, he will be able to live the rest of his life as wants!
5 Tips On How to Save Money
1. You should know exactly why you want to save in the first place.
A lot of people give up and stop saving because they don’t see exactly why they are saving. Your goal shouldn’t be to save for a great wedding or a brand new car because once you get that car, you will go back to your previous position and still face those financial challenges, so the ultimate goal should be to achieve financial freedom.
2. Pay yourself first!
Before even spending a single penny out of your income, put aside a percentage of it into your saving account (if you don’t have one, then make one). You are not allowed to spend this money under any circumstances, no matter what you are going through this money cannot be spent anywhere, but only can be invested. Consider is to be as part of your taxes, something that has to pay whether you like that or not.
3. Know your expenses
If you are not a consistent saver, then it might be difficult to start, especially in the first couple of months, when you realize that your savings aren’t growing as fast as you would want them to. So, instead, know your expenses first. Spend the next 30 days writing down every transaction you make, so that By the end of the month, you have will a detailed understanding of how exactly you spend your money and you can deduct your expanse in those areas that don’t have a big effect on your life.
For instance, instead of buying a coffee every morning, you can make that yourself and save somewhere around 50 to 70 bucks a month. instead of driving, use public transport to get to your job if it’s more affordable and you might save another 50 or 60 bucks there. And you might save a couple of hundred dollars like that.
Procrastination is bad but in this case. Usually, we get excited when we want to buy something new right away even if it’s something we don’t need, but over time that excitement goes away. It’s like when you buy that new phone, if the first couple of days, you might still be excited about it but then, you know what happens, it just becomes normal. So why not get in the habit of waiting to buy things, especially expensive ones?
You’ll still end up buying all the important things you need, but there will be plenty of times when you change your mind and hold onto your cash.
5. Use cash always
Whenever you buy something, try to always use cash instead of a debit card, whether you are ordering food in the restaurant or getting something from groceries. Handing over a 20 dollar bill is a lot harder than just swiping your credit card, simply because when you swipe your card, it feels like you are spending a lot less. Over time, you will become a more conscious spender and you’ll buy more of what you need and less of what you want.