If you are saving money, your money will save you in the long-run.
We’ve all had issues with saving money at some point in our life. It seems as though that what we currently make never seems to satisfy all of our needs and desires. So, this begs the question, “How much will be enough to satisfy both?” People naturally buy things that they really don’t need. This can result in our wants exceeding our needs and thus, we fall into debt. When you save, you can have the flexibility to use that money to make more money. Ask yourself these 2 simple questions.
Am I living within my means?
Chances are, you are not. Simply put, spend less money than what you bring in, period. However, that is always easier said than done. Many of us make the mistake of living outside our means because we don’t even know what our means are. In turn, we get loans, credit cards, and even pull from savings to compensate for those extra amenities that we really cannot afford. Your income should be able to cover all of your monthly needs. If other sources are needed to satisfy those needs only; then perhaps you might need to downgrade.
What are my wants vs my needs?
Many of us are not capable of differentiating the two. Your needs are what is required to sustain daily life. You need food, clothing, shelter, money to pay bills for that shelter…etc. Your wants come into play when you buy that designer jacket for the winter instead of the basic off-brand one that can still do the job. Those types of decisions are what actually gets many of us in trouble and a nice debt that soon follows.
The art of saving money
- Have more than one stream of income. The problem with most people’s finances is that they are not getting enough income to satisfy both their needs and wants. This is where an additional stream of income may come in handy. Initially when we think of additional income, we automatically think about getting a second job. There are many different ways that you can obtain passive but profitable sources of income. The key to additional income is not to secure income that will make you work harder, rather income that will make you work smarter.
- Track your expenses. You’d be surprised to learn exactly where your money goes every month. Many of us have online banking that can track all of our expenses used by our credit card. You can even generate a spending report that that separates your expenses into groups (food, bills, shopping…etc.) This will give you a better understanding of exactly what you spend your money on the most.
- Create a monthly budget. I prefer to record my expenses in ‘good old’ Excel. Sit down and write out all of your financial obligations for the month. Remember, only write down your needs and be able to differentiate them from your wants. Subtract those expenses from your income to determine how much flexibility you’ll have. Once completed, add a line for entertainment, emergencies, and savings. If you have anything left after contributing to the latter then, congrats, you have set the foundation for living within your means.
- Have a monthly goal of how much you’ll put in savings. This is perhaps the most important. This will not only discipline you to save money but, will also save you in the long-run. Be reasonable when setting this goal. Don’t make the mistake of putting too much into your savings that you have to constantly take money from it.
Saving money is almost a work of art. It takes self-discipline, dedication, and an end-goal in mind.