If you find it difficult to save, know that you are not alone in this. While almost everybody knows about the importance of setting money aside, many are unable to do this on a consistent basis. This is unfortunate because a consistent savings habit is one of the key elements for wealth accumulation. In this post we will discuss some of the ways one can overcome the hurdles to saving and become a consistent saver.
- Automate your savings. If there’s a single cheat code to savings, this has to be it. Set up a standing order on your salary account to transfer a portion of your income each month to an investment such as a mutual fund or a pension fund. The key to being consistent here is to set aside an amount that is sustainable. It is better to set aside 5% or 10% and be consistent with it than to set aside 25% and then immediately start making withdrawals from the investment because you are short of funds. Also remember to adjust your savings rate upwards each year.
- Budget. Create a simple table of your income and expenses each month to guide your spending for the month and help to reduce impulse buying. Remember to include vacations, eating out or other fun activities into the budget. This will ensure that you do not have to draw from your savings in order to have fun.
- Set a retirement savings target. How much would you need to retire? If you do not know the answer to that question, then it’s time to start putting some figures together. Factors to consider include how many years you have until retirement, whether you have children or you are planning to, and whether you plan to own property or rent. Having a figure in mind helps you to remain focused on your savings. You can try this retirement calculator to get a fair idea of how much you would have accumulated by retirement.
- Get the large recurring expenses right. Savings can be impossible to do when you simply cannot afford your current lifestyle. It is important to ensure that large or important recurring expenses can be comfortably handled by your income in order to give you some wiggle room. Examples of the large expenses include rent, fuel, vehicle maintenance, food, utilities and subscriptions. Perhaps you have the funds to purchase a luxury car but you cannot afford the fuel and maintenance costs. Perhaps putting 50% of your income towards rent may put too much pressure on you, and you might need a more affordable place. If you bring these recurring expenses down to a level which better matches your income, you are going to be more likely to save consistently.
- Dedicate an income stream to savings. If you get the opportunity to create another income stream aside from your main job, commit that income or a large part of it to savings. You can also decide to save everything you receive by way of gifts or bonuses.
If you want to get started saving and you’re looking for great savings products to try, why don’t you talk to IC? With a call to +233 (0) 308250051, you will be guided by a professional on the best way to generate returns on your savings.
Thank you for reading.