Saving money every day is something that we all want to do. However, actually figuring out how to make your money stretch further is much easier said than done. You know that you want to accomplish amazing things with your cash, but it’s all too tempting to spend extra money on a takeaway when you can’t be bothered to cook after a long day at work.
The good news is that even if you’re a total beginner when it comes to building positive saving habits, you can still make progress in the right direction. Today we’re going to cover some of the basics of saving money for people who are new to the practice.
Step 1: Know the difference between saving and investing
First things first, it’s important to recognise the huge difference that exists between saving money and investing. Saving and investing both have a part to play in your life. However, they work in very different ways. For instance, saving money is all about putting your cash in a place where you know it will remain safe and unchanged for your future. That cash sits and waits for you to use it when you need it, and you can grow it over time by adding to it. However, the money won’t grow by itself.
On the other hand, with investments, you take slight risks with your cash in the short-term, in order to make more money in the long term. Something as simple as taking out a loan today via someone like Cobra so you can afford to go to college and get a better degree is a kind of investment. You can also invest in things like stocks and bonds that help you to build money for retirement.
While savings help to protect you from the unexpected things that can happen in life, investments are how you ensure that you can live the kind of lifestyle that you want in the future. It’s best to start with savings first so that you have an emergency fund to fall back on, then look into investing when you know you can afford it.
Step 2: Change your mindset
One of the biggest problems that many people have with saving, is that they don’t’ approach it from the right mindset. They decide that they want to have two grand in their bank account, so they tell themselves that they need to put £200 away each month to reach their goals. Whenever they fall under that target – no matter how unrealistic it might be, they see it as an excuse to give up.
However, the truth is that you don’t have to make huge dents in your savings goals to be making real progress. Something small like putting a few pounds away every week can make a huge difference to your future. What’s more, as you get used to the act of saving and thinking more frugally about your money, you’ll find that you gradually discover new ways to build your wealthy over time.
As with most major things in life, saving money is a process that starts with just a few small steps. Once you get started on the right track, you’ll be amazed how quickly your money grows.
Step 3: Know how much you can save
Understanding how much you should be saving to reach your goals, and how much you can actually afford to save is very important. To do this, you’ll need to think very carefully about what you want to achieve with your finances. You’ll also need to take some time to look through your bank statements and figure out how much money you’re spending every month.
Once you’ve got a list of all your incoming and outgoing expenses, make a bare bones budget. This means that you remove everything that isn’t absolutely essential. Add savings to your bare bones budget, then you can begin to add the little extras that you often spend money on to the plan after that. This might include subscriptions and meals out with friends that you can afford to do without.
Ultimately, no matter how hard it might be at first, you should be making sure that you’re paying your savings account just like any other essential bill in your monthly plan. Once you do that, you can begin to look for ways to make saving easier, like finding ways to make more money from a second job, or finding opportunities to cut the costs of your bills by switching to different providers.