Finance

Forget Three Square Meals

It is a common knowledge that every human being has some basic needs that requires satisfaction such as food, clothes and shelter but this fact should not deter or prevent us from saving.

Savings refer to money you put aside for future use rather than spending it immediately. In addition to the benefits of saving up for future purchases, delaying an impulse purchase also helps you decide whether it is something you really need, or a waste of money you will regret shortly after buying.

Savings comprise the amount of money left over after spending. For example, Mary’s monthly paycheck is #5,000. Her expenses include a #1,300 rent payment, a #450 car payment, a #500 student loan payment, a #300 credit card payment, #250 for groceries, #75 for utilities, #75 for her cellphone and #100 for gas. Since her monthly income is #5,000 and her monthly expenses are #3,050, Mary has #1,950 left over.

If Mary saves her excess income and faces an emergency, she has money to live on while resolving the issue. If Mary does not save her extra money and her expenses exceed her income, she is living paycheck to paycheck.

If she has an emergency, she does not have money to live on and must secure payments for her bills.

Saving money requires a lot of discipline. However, with firm determination, it is not a difficult habit to adopt. Many Nigerians can benefit greatly from the habit of saving if they choose to do it faithfully.

No matter where you are on your financial journey, you need to know that it’s possible for anyone to turn their financial life around and start saving money.

Sometimes all it takes is that first step in the right direction to get things moving in your favour. But, as with most things, sometimes that very first step is the hardest part.

The following have been identified as strategies for effective saving:

One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for—perhaps you’re getting married, planning a vacation or saving for retirement. Then figure out how much money you’ll need and how long it might take you to save it.

Establish your budget. Are you looking for an easy way to begin? On the first day of a new month, get a receipt for everything you purchase. Stack the receipts into categories like restaurants, groceries, and personal care. At the end of the month you will be able to clearly see where your money is going.

Do a price comparison – and find a cheaper grocery store. Most of us get in a routine of shopping at the same grocery store, and we may not even realize that we’re not getting the best deal.

Fortunately, there’s a simple way to find the cheapest store around. Just keep track of the 20 or so things you buy most often, then shop for these items at a variety of stores.

Eventually, one store will come out on top for your purchases – just make that one your regular shopping destination and you’ll automatically save money.

Don’t just save money, save. There’s a difference between saving money and saving money for your future. So don’t just spend less, put the money you save into a savings account to plan for college expenses, retirement, or emergencies that can leave you financially better off.

Save automatically. Setting up automatic savings is the easiest and most effective way to save, and it puts extra cash out of sight and out of mind. Every pay period, have your employer deduct a certain amount from your paycheck and transfer it to a retirement or savings account.

Buy used when you can. You can often find the exact item you want with a bit of clever shopping at used equipment stores, used game stores, consignment shops, and so on.

Just make these shops a part of your normal routine – go there first when looking for potential items and you will save money.

Start saving for your retirement as early as possible. Few people get rich through their wages alone. It’s the miracle of compound interest, or earning interest on your interest over many years, that builds wealth. Because time is on their side, the youngest workers are in the best position to save for retirement.

Don’t toss out a shirt because of a broken button – sew on a new one with some closely-matched thread. Don’t toss out pants because of a hole in them – put in a patch of some sort and save them for times when you’re working around the house.

Use the 24 hour rule. This rules helps avoid purchasing expensive or unnecessary items on impulse. Think over each nonessential purchase for at least 24 hours. This is particularly easy to do while shopping online, because you can add items to your cart or wish list and come back to them a day later.

Eat less meat. Meat is very expensive when you consider its nutritional value, especially as compared to vegetables and fruits. And in almost every case, protein-packed staples like beans offer a much better value.

Even if you don’t want to become a full-fledged vegetarian, you can still save a bundle just by eating meat less often.

Place a savings reminder on your card. Remind yourself to think through every purchase by covering your card with a savings message, such as “Do I really need this?” Write the message on a piece of masking tape or on your card.

Create a family spending limit on gifts. Discuss placing spending limits on gifts within your family and/or a system where you only purchase one gift for one person over the holidays. These limits tend to reduce expenditures and be greatly appreciated by family members with less financial flexibility.

Plan gift-giving well in advance. That will give you time to decide on the most thoughtful gifts, which usually are not the most expensive ones. And if these gifts are products that must be purchased, you will have the opportunity to look for sales.

Quit smoking. If you’re still a smoker, you have to know by now that your habit is not only expensive, but potentially deadly as well. If you want to add years to your life and save a boatload of money, the easiest thing to do is to stop smoking altogether.

Don’t buy cheap clothes for cheap’s sake. It sometimes make sense to prioritize quality over price when purchasing clothes for the family. An inexpensive shirt or coat is a poor bargain for older family members if it wears out in less than a year, but could make sense for quickly growing children.

Commit to eating out one fewer time each month. Save money without sacrificing your lifestyle by taking small steps to reduce your dining budget. Start off with reducing the amount you eat out by just once per month.

Write a list before you go shopping – and stick to it. One of the easiest ways to save money is to only shop when you have a list. Because when you’re without one, you typically end up making impulse buys and unplanned purchases – all things that cost money.

Creating a list before you go to the grocery store is especially significant. Not only can it help you buy items that fit with your meal plan, but it can also help you avoid buying food you might waste. Always create a list and, more importantly, stick to it.

Cancel subscriptions and memberships you don’t use—especially if they renew automatically.

Give yourself a “cooling off period”: When tempted by a nonessential purchase, wait a few days. You may be glad you passed—or ready to save up for it.

Finally, review your budget and check your progress every month. Not only will this help you stick to your personal savings plan, but it also helps you identify and fix problems quickly.

Understanding how to save money may even inspire you to find more ways to save and hit your goals faster. (Source: Bank of America, TheSimpleDollar.com and America Saves).

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