Saving money is one of the life skills that you need to nurture to improve and safeguard your financial stability. A shocking report shows that if you start saving for your retirement when you clock 45 years, you will have no option but to save four times your annual salary. On the other hand, if you start saving in your 20s, you will only need to save 25% of your annual salary for retirement.
Saving when you are in your 20s can be difficult due to the many conflicting interests. However, the struggle is worth it – depositing $200 every month into a savings account when you are 25 years old is much easier than putting away $3000 each month when you are 45 years old.
The point we are trying to put across is that you should start saving early not only for retirement but also for any other financial goal that you have, such as buying a home.
Here are some frequently asked questions about how to save money and tips on how to do it well.
What is The 30 Day Impulse Spending Rule?
Impulsive spending is one of the primary reasons why most people are unable to save money. The 30-day rule is meant to prevent you from making impulse purchases. It entails postponing a purchase for 30 days. Write down the item, service or anything else you want to buy on a piece of paper and tell yourself that you are going to think about it for 30 days.
This delay will give you enough time to do your research and decide if it is worth purchasing the item. If you still feel the urge to buy the item after the 30 days, go ahead and purchase it. If not, channel the money into your savings account.
Can I Save Money with a Low Income?
Yes, you do not need to earn thousands of dollars per month to start saving. The goal is to start small and increase the quota as your financial status improves.
Here are seven expert tips on how to save money on a low income in the current economic times.
- Keep Housing Costs Low: Unknown to most people is that housing cost is the biggest monthly expense and can quickly drain a budget. By making sure that your housing costs do not exceed your budget and resonate with your financial capability, you will have more money to put away as savings. The rule of thumb is that the total housing expenses should not exceed 35% of your net monthly income.If you live in a rented apartment, look for cheaper housing that is secure and ideal for your lifestyle. You can also discuss with your property owner about trading work on the apartment for a reduction in rent.
On the other hand, if you are a homeowner, you can rent out one of the rooms in your house to reduce the house payment cost. Come up with a robust way of cutting down utility costs and ensure that the home is in good condition to cushion yourself from costly repairs and unnecessary upgrades.
- Get Out of Debt: According to a report by CreditCards.com, as of March 2019, the average interest rate on credit cards was 17.65%. Accumulating debt means that you will have more monthly payments and less money to channel into the savings accounts.
- Consider Reducing Entertainment Costs: Reducing entertainment costs will make it possible for you to put aside more money for retirement and other financial goals. For example, instead of an expensive dinner at a restaurant, hold a potluck dinner at home. Schedule a movie night complete with your favourite soda and popcorn at home.
- Buy Products When Necessary: Unnecessary expenditures, even when you have a budget in place, will make it difficult for you to achieve your financial goals. Peer pressure is one of the root causes of unnecessary purchases. Commit to buying products and spending on services only when it is necessary.
- Control your Expenditure on Groceries: On average, a family of four spends at least $900 per month of groceries. You can save money on groceries by preparing a menu plan for each week, create a weekly shopping plan and stick to it, avoid purchasing unhealthy foods and beverages, and learn to cook at home instead of buying processed meals and snacks.
- Create A Zero-Sum Budget: A zero-sum budget means that you create your budget in such a way that every dollar that you earn has a pre-determined use. Any money left after the expenses should be directed into the savings account.
- Automate Savings: This is probably one of the easiest ways of saving more money when on a low income. Direct your bank to channel a specific amount of money into your non-retirement or retirement account at one particular date every month.
How Can I Save Money on a Daily Basis?
Trying to increase the amount of money that you set aside as savings every month does not mean that you restrict yourself to the life of a hermit. Doing away with small expenses daily can make the process easier and less stressful. Below are five tips on how to save money every day.
- Reduce your Expenditure on Snacks: The first thing that you need to note is that your friends and colleagues have a significant influence on how you spend your money during weekdays. Consider reducing the amount of money that you spend on snacks such as bubble tea and soybean drink. That extra $3 or $2 will have a major impact on the amount of money you will have saved at the end of the month.
- Have a Daily Budget: List down the things you spend money on every day and stick to the plan to prevent impulsive spending. Instead of an expensive lunch meal, go for a healthy gourmet salad. It will keep you rejuvenated and full the entire afternoon and even improve your appetite at dinner.
- Carry Food From Home: Packing food from home will not only help you save money that you would have spent on lunch but also help you live healthily. Needless to say, a homemade cheese sandwich or tuna is more satisfying as you have control over the size of the portion.
- Try Off-Peak Dining: By dining during off-peak hours in one of the local restaurants, you might get up to a 50% discount on your favourite meal. Most of the bakeries also offer a generous discount off their buns and bread to customers who purchase after the usual dinner hours. You can pick a few and use them to prepare breakfast or supper the following day.
- Leave your Credit Cards at Home: If you find it difficult not to purchase things that you have not budgeted for, consider leaving your ATM and credit cards at home. This will ensure that you only have liquid cash for things that you have already planned for always. You can also go an extra mile, withdraw a fixed amount of money from the ATM every week, and commit to never spending more than that.
How Can I Save Fast?
The amount of time it will take to accumulate the amount of money you need for a particular project is dependent on the amount of money you put aside as savings. Below is a list of tips that you can use to save money fast.
- Sell items that you no longer need and deposit the cash into the savings account
- Sign up for free customer rewards programs
- Change bank accounts to leverage perks and earn more interest
- Instead of buying gifts, consider making homemade gifts
- Learn the 30-day rule and stick to it
Regardless of your current financial situation, you can start moving in the right direction by starting to save today. Sometimes, all it takes is the decision to start saving and making the first step in the right direction to get things moving. Note that the very first step is usually the hardest part. Focus on the end goal whenever you feel like giving up.
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