I was inspired to write this week’s topic when my friend Jenny approached me and asked me for some hints on saving money. The universe is amazing as while I mulled over how I would write this blog, I kept getting reminders from unexpected places about the actual topic of money.
Managing your finances is about giving you more choices in your life.
I have seen many people stressed and upset because they are in debt. By putting in a bit of effort into your finances, you will give yourself more peace and more control of your life. Most people spend more time planning their holiday, than they do planning their finances. So why not make managing your money a priority and live the life that you want.
Below are some hints on how to save money and it will hopefully start you thinking about what you can do.
I hope it makes you realise that you have the ability to save money to buy your items. There is no need for you to get into credit card debt, as you can use your savings instead.
Saving money does not have to be a difficult time in your life. A lot of people stay away from saving as it all seems too complicated and they feel as though they are depriving themselves from the things that they like to buy or do.
Saving money does not mean that you have to change your life in a dramatic way.
For instance, look at what you spend your money on each week. How many of you buy soft drink each week. Imagine if you saved the soft drink money instead? For this example let us say that a bottle of soft drink is $4 from a cafe. If you buy one bottle each day, it costs you $28 per week.
What if you saved that money instead of buying soft drink?
After 1 week you will have saved $28.
After 1 month you will have saved an average of $112.
After 1 year you will have saved approximately $1,460.
You have managed to save $1,460 by simply not drinking soft drink for a year.
So you can see that saving money is possible by giving up the non-essential items in your life.
Here are some tips on saving money that you might find useful.
1) Set a goal.
This is important as it will motivate you to stick to your savings plan.
For instance, if I told you to save your soft drink money for a year. How happy would you be to do that? Chances are that after a few weeks you might lose interest and start buying soft drink again. However, if you knew that you were going on a holiday after saving for one year, how willing would you be to save the money? My guess is that you would be very motivated, as there is a reward at the end of your savings plan. This applies to whether it is a car, a deposit for your home or even your retirement fund.
Set yourself a goal that will motivate you to stick to your savings plan.
2) Work out the price.
Compare prices and work out how much you need to save in order to buy your goal.
Eg. If you wanted to go a holiday to Bora Bora, you may find through your research that it will cost you $1,500. So $1,500 is the amount you need to save for your holiday.
3) How much do you need to save each pay?
Divide the price of the item by the number of pay periods you have between now and when you want to buy the item. This will tell you how much you will need to save each pay so that you can have enough money saved up.
Eg. You want to go on a holiday in 1 years’ time and there are 26 pays in a year.
The holiday costs $1,500 and there are 26 fortnights (52 weeks) in a year.
$1,500 divided by 26 = $58
You will need to save $58 each pay, to have enough money for your holiday in 1 year.
4) What is your budget?
Look at how much money you receive every pay, then deduct all your essential expenses for the same period. That will tell you how much money you have left and whether you are able to save the money each pay.
Money coming in – essential expenses = money you can save
Note: Essential expenses are bills like food, water, rent and electricity.
Eg. You get paid $1,000 each fortnight and your expenses are $600 per fortnight.
$1,000-$600 = $400
Step 3 showed you only need to save $58 each pay.
However your budget shows that you could save up to $400 per week if you wanted. You might decide that you need some spending money so you decide to save $100 per fortnight.
5) Automatic deduction.
Once you have worked out how much you need to save each pay, set up an automatic direct debit from your everyday account into a savings account. It is important to have a separate savings account so that you do not feel tempted to spend the money. Out of sight, out of mind!
Now set and forget, until you are ready to pay for your holiday.
6) Window shopping.
This is where you can make it fun. So while you are waiting for your money to be saved up, start shopping around for what you want. Go to shops, look on the internet, or collect brochures. Do this for the time period while you are saving your money. It will keep you excited and motivated about what you will enjoy at the end.
Eg. You would collect travel brochures on Bora Bora and do a bit of research on it. Find some pictures that will let you visualise your holiday.
After you have saved enough money, go out and buy it.
You will find that you will really appreciate it as you have worked for it.
Using your savings to pay for your holiday means that after your trip you do not have to worry about paying any more holiday bills when you return home. You can stay relaxed and can look back on your vacation fondly.
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Hope you all stay safe and keep smiling.