Savings are the foundation of a healthy financial lifestyle. The more you save (and invest wisely), the earlier you will be able to attain financial freedom. If you find yourself struggling to save, consider these strategies to maximise your savings rate. Remember, savings requires a change in mindset and approach instead of a specific tactic so it becomes a lifelong, and rewarding habit.
Live below your means
Living within and if possible, below your means is one of the most effective ways to increase savings. If your current lifestyle prevents you from saving, it may be time to a serious look at your fixed expenses i.e. housing and transportation. Can you move to a smaller apartment or a different neighbourhood? Would a less expensive car or taking public transport be an option? Don’t forget to look at variable expenses such as food, shopping, entertainment and dining out. The idea behind living below your means is not to deprive yourself of life’s pleasures but to examine what truly makes you happy and choose to spend your money wisely.
Want to challenge yourself further? Saving whatever is left after expenses will not compel you to re-examine your lifestyle and cut expenses. Instead, think about ‘reverse budgeting’ by setting yourself a tangible savings goal via a target amount or percentage. Putting a specific amount aside each month will help you build discipline and add up to a sizeable savings fund.
While it is tempting to use a pay raise or a bonus on a spending spree, it is important to retain perspective while celebrating your success. A pay raise or bonus is recognition of your hard work and it is hugely satisfying to be rewarded for your performance. However, a pay raise also acts as a hedge against inflation so the amount you receive may not be as much as you think in real terms. Resist the temptation to adjust your lifestyle to your bigger salary and instead ‘pay’ your savings accounts. Increase monthly contributions to your regular savings or investment accounts in proportion to the raise so you can grow your retirement fund. If you have debt, use all or a majority of your bonus to clear debt and top off your emergency fund.
Without goals, you may see savings as an abstract concept and find it harder to be disciplined and/or motivated to save. Goals, whether short, medium or long-term provide purpose and structure by providing a clear reminder of what you are aiming for. Is it a debt-free life, a fully owned dream home, a new car or a relaxing vacation? Define your goals (insert link to Goals article), write them down and if you like, pin them up on your refrigerator or your computer so you can everyday visualize and work towards your goals by saving better.
If budgeting is not helping you increase savings, you may need to look at additional ways to increase your income. Can you turn a passion or a hobby into a business? Take up consulting or freelancing? Look at offering your skills, whether it is fitness training or teaching a new language? Perhaps you are handy at fixing things or a good painter. Look at your neighbourhood social media platforms to identify your community’s needs and how you may be able to monetise your skills and talents. Any extra income will help pay the bills and help you boost savings.
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