Whether you are saving for a house, retirement, family education costs, or just to be more financially secure, saving for the future can be a bit of a challenging task. No one can predict where the future will lead them, but saving money aggressively can pay huge financial dividends for you later on in life.
While the idea of saving a large sum of money might be intimidating, it doesn’t have to be if you create a plan and get started as soon as possible. Here I will cover how to save for the future, the steps to get you saving more, and reasons why it is important.
1. Create a simple budget
Having a budget will help you assess your current financial health and make a plan for the future. Start by keeping track of your expenses; Once you know where your money is going, make a plan for what you want your money to do in the future.
2. Get your debt in control
Your monthly debt payments can take a huge toll on your emotional and financial health. You feel stuck in this cycle of debt where you can’t get rid of these financial commitments. Get your debt under control by paying it off as soon as possible, following either the debt snowball or debt avalanche method.
3. Master instant gratification
Learning how to identify the feelings of urge and mastering instant gratification can save you money in the long run. Instead of purchasing something immediately, make yourself wait for 30 days before making the purchase. If you still want the item after 30 days and you have the money, then you can buy it without any guilt or remorse.
4. Start paying yourself first
Paying yourself first is one of the best ways to get into the habit of saving. It’s very simple: every time you receive your paycheck, take a percentage and set up an automatic transaction directly to your savings account.
Every time you get a raise, bonus or a tax refund, send it directly to your savings account. Instead of waiting till the end of the month to see if there’s anything left to save, make the saving a priority.
5. Cut back on major expenses
Large expenses can be another huge suck on your money, whether it’s a car, a holiday, or a house. Instead of spending tons of money, look for other ways to satisfy your needs. For example, housing is one of the major expense. Consider moving elsewhere to save money. Additionally, look for ways to save money on food, cut back on other extensive spending, etc.
6. Use compound interest to your advantage
Compound interest is your friend when it comes to saving for long term goals such as your child’s education, your retirement, or a house deposit. Make sure to maximize your tax contributions, open tax-advantaged accounts and invest in the stock market through low-cost index funds. Compound interest is the key to making money work for you over time.
7. Create specific savings goals
Saving can be made fun by having a clear objective in mind. Set up separate accounts with the name of the object or goal you are trying to reach. Whether it’s for the wedding, a vacation or a new phone, seeing the money accumulate over time can be very rewarding.
Start with a small goal, and see what it’s like to be able to afford it and buy a small fun item like a phone or a gift. It will give you a bit of a moral boost and encourage you to save for other large goals like retirement.
8. Level-up your income
You can only cut so much back in your spending to save. But with income, there is no ceiling of your earning potential! Figure out how you can make more money from your job, ask for a raise, or consider job hopping to get a pay increase. And don’t forget, your job is not the only way to make money!