Have you heard of the famous line, “the art is not in making money but in keeping it.” It would like us to know that we will always have the chance to earn money, we have a lot of opportunities to make money as long as we work harder and smarter, but keeping the money so it would last for a longer period is somewhat hard to do and it would require a lot of discipline in handling the finances. It is crucial to arm ourselves with smart financial decisions, so we never lose control of our finances. Our biggest goal in life should be to make a solid budget plan and stick to it while working towards saving, to ensure a sound future.
Here are some lessons about saving money that can inspire and guide us toward our journey to financial freedom.
Define your priorities
What are your priorities in life? Of course, it is basic that you should settle the needs first before the wants. For you to be able to save more money, you should have paid your bills first, which might include the mortgage or rent, the electric bill, other utilities, insurance, loans, and debts, etc. After paying, a part of what will be left will go to savings. As a rule of thumb, you should save at least 20% of what you are earning every month, but if it isn’t possible, then you can adjust your expenses. Canceling some of your monthly subscriptions that are not needed or rarely used will help a lot for you to save bigger amounts.
Paying your bills first and repaying loans and debts on time, is also saving because doing so saves you from penalties such as late fees. You also save time and effort because you free yourself of any inconvenience that may arise.
Your savings must be based on your entire paycheck but your spending should be based on the money left over, that is what you live on.
Saving for rainy days and your dreams
These two things go hand and hand because they are the reasons why you are saving.
Saving for your dreams is securing your future, retirement, and financial freedom. Saving for the future will give you a less stressful life as you grow old; and as you get older, you'll live your remaining days with freedom and peace because you have enough savings that can cover whatever expenses are needed.
Of course, you don't only save for your dreams, but more importantly for uncertainties in life. You don't wait for something undesirable to happen before you realize the importance of saving for rainy days. Emergency savings should be at least 3 to 6 months of what you earn monthly, according to experts. In this era of too much uncertainty, being proactive is an advantage.
Difference between savings and Investment
Money that is sitting in a bank, doesn't always earn much. Not all financial institutions can give each depositor a big interest. But if you invest your money in a business, it generates income and when you manage the venture well, your money multiplies. Saving in a bank and investing in a business, both have downsides. Money on investments isn't always accessible and the risks are higher, depending on where you put it. But over the years, most investments increase and that is savings multiplied. The best way is not to put everything on investments. Have some money in the bank which you can withdraw any time you need it.
