There are many points of view when it comes to saving. Most people advocate for it, some people prefer focusing on investing in stocks and bonds as a more reliable way of saving money. Since I personally am not in a position to start formally investing just yet I’m creating a sort of “nest egg” while I learn about formal investing and decide how I want to go about it. Whether you’re using a formal government saving plan like a pension plan or just choosing to do it on your own through savings accounts, I believe having some sort of savings plan is always a good choice. It might be for retirement, it might be for a down-payment on a house or it might be your for a big investment in the future. Either way you look at it it’s something worth doing.
If you’re still not convinced that saving is important or on how to go about it for you, take a look at your financial goals and let them determine what’s the best course for action for you and your budget. We’ve discussed why having financial goals is important here and on many other posts so you can brush up on that in case you missed it. I strongly recommend reading Suze Orman‘s “The Money Book for the Young, Fabulous and Broke”, it gives a very good perspective on the importance of saving and different ways to go about it (now, the book is US based so a lot of the terms and methods are geared towards people living in the US so make sure to read up on the equivalent plans for your particular location, the basic concepts still apply) and on the flip side, Robert Kiyosaki‘s “The CASHFLOW Quadrant” gives some great points on why saving might not be the “safest” bet. Read up on the subject and take the lessons you feel valuable. I choose to save, primarily because it fits with my current situation and lifestyle but I did take a some very good lessons from The CASHFLOW Quadrant that I plan on incorporating as soon as I’m proficient/confident in formal investing.
Now, if you’re sold on saving let’s get to a few things that’ll make it easier to actually save money since that seems to be really though to start doing (but really rewarding once you’ve got the hang of it.) But before we get into it, a quick note on emergency funds, savings and investment funds:
Not all savings where created equal.
- An emergency account as we’ve discussed before is a more accessible account, it’s for “right now” sort of emergencies.
- A savings account is (ideally) inaccessible or hard to access, not to be touched for any other reason that it’s ultimate goal (retiring or buying that house etc.).
- An investment account is one that you start building with the intent of using it for either formal investments (real estate, stocks, bonds etc.) or reinvesting on your professional skills (a marketing course, books or tools that’ll support your chosen career, etc.) which is the way I’m using it now (but we’ll get into that on next week’s post).
Now on to the main course: How to make sure you grow your savings account
1. Have a plan for it. Decide what that money is going to be for and under what conditions it should be accessed. Write it down and keep that with the card so that whenever you feel tempted to use it you’re reminded of what it’s for. If it’s for retirement then write down “retirement fund” and if you’re only going to access it once you retire then write that down too. Make sure you’re always reminded of what it’s for so you’re less tempted to use it unnecessarily.
2. Include “saving” in your budget. A good budget plan should always have a savings component to it. Either a fixed amount or fixed percentage like we talked about in this post, the “saving” component should be included in your budget plan.
3. Have a separate account for it. This way it’s clearly defined and there’ll never be any confusion as to how much you have in savings and how much is money to use. Trust me, I’ve tried “making a mental note of how much of what I had were savings” just because I was too lazy to open a separate account and it never worked.
4. Make it a direct deposit. Or the first thing you do once you get your paycheck. If you’re using a separate account to save, try and make your saving amount a direct deposit as soon as you get your paycheck. That way your bank handles it as soon as you get paid and it’s done and over with and out of your way. You don’t have to worry about withdrawing money, depositing it somewhere else, finding change and waiting in line if it’s not an amount you can deposit directly in the ATM etc., and it just eliminates a whole bunch of excuses we might be inclined to make.
5. Avoid checking your balance. If you’re anything like me you’ll feel tempted to “reward yourself” for doing such a good job saving that you end up spending some of it which is completely counterproductive.
6. Make the card inaccessible. Whether you decide to chop it up or give it to someone else for safekeeping or just lock it in a drawer somewhere, the harder the card is to access, the less you’ll be tempted to use it (this should also get rid of the issue in #5). Now, a note on this, I personally have a very hard time with this and now for a fact that I cannot have this particular card in my wallet at all times because the temptation is just too much. I keep it locked in a drawer (still trying to muster up the courage to chop it up because even the drawer is sometimes tempting).
And there you have it. 6 tips to make “Saving” an easier and hassle-free experience for you. The most rewarding thing I found about finally being able to save was not the security of having the money to fall back on but mostly the feeling of “maturity” and “having your life together” for having the discipline to save. These are the little steps we need to take in order to develop confidence and discipline not only in regards to money but also in regards to other things we do in our lives. Hope this was helpful!
How to you feel about saving? Do you think it’s useful or that we should focus on other forms of acquiring wealth? What’s your biggest obstacle when it comes to saving? And what tip has helped you conquer those obstacles? Questions? Comments? Suggestions? Leave them down below!