Saving money is an important life skill. It allows you not only to make expensive purchases, but also to form an airbag that will help you and your family gain stability and financial independence. However, many of us have bad habits that prevent us from managing our funds wisely.
In this article, we will figure out what you need to stop doing in order to start saving money effectively.
Habit 1. Don’t Count Expenses
Almost everyone knows how much he earns. But not everyone keeps track of their spending. Many people have no idea how much their families spend on average monthly on food, clothes, gasoline or public transport. They just buy what they need. If money remains, they are set aside; if there is not enough money, they borrow from relatives or friends.
You can’t do that. If you don’t track how and what money is spent on, then you will never save up for anything, because you simply won’t be able to systematically save them. After all, you don’t know how much you can “withdraw” from the family budget so that your standard of living does not suffer. In addition, you do not have a clear idea of which expense items should be optimized in order to spend less.
To learn how to save money, you first need to start counting expenses.
Habit 2. Spending every penny
This bad habit is closely related to the previous one. As a rule, if you do not track expenses, then you spend exactly as much as you get. And therefore, you often simply do not have money in order to save at least something.
Calculate your expenses and, if they turn out to be on average equal to your income, think about what you can optimize. After that, you will understand how much money you can put aside for savings. Many experts agree that, on average, 10% of all income is affordable for most people. Are you able to save more? Excellent. Not? It’s OK. And if during the calculations it turns out that you cannot afford to save even 10% of your personal income, think about what you should save on. When your piggy bank replenishes too slowly, there is a great risk that you will break loose and spend everything that you have managed to accumulate with such difficulty.
Habit 3. Save for savings only what is left of the salary at the end of the month
This is fundamentally the wrong approach. First, there is a great risk that at the end of the month you will have nothing left. Secondly, your savings will become uneven. You will not be able to plan how fast the amount in your piggy bank will grow, and this will greatly reduce motivation.
Set aside a certain portion of your income as soon as you receive the money.
Habit 4. Save up, but don’t know what for
Any human activity must have a purpose. Especially one that requires some willpower. When we save money, we partially limit ourselves in spending on an ongoing basis. And, if you don’t explain to yourself why this is being done, our brain will try in every possible way to sabotage such “voluntary deprivations”. After all, he knows that the next purchase will definitely cause an influx of endorphins. And you, because of your desire to accumulate, deprive him of these hormones of joy.
Therefore, you need to understand why or what you are saving for. The goal should be important or enjoyable. For example, if you have been dreaming about a car for a long time, your brain will agree that you save money, bringing the day of the coveted purchase closer.
If you want to create a financial airbag, this desire also needs to be clearly fixed for yourself. Imagine all the negative consequences that you may face if you do not have savings. Then think about the sense of security and contentment you will feel when the pillow is created. That’s it, now your brain has fixed that savings are not hardships, but the path to security and the fulfillment of a dream.
Habit 5. Spending savings “for the wrong things”
Many people spend their savings on something other than what they intended to. For example, you saved up for a washing machine. But suddenly they remembered that a friend had a birthday soon, and took a certain amount from their piggy bank. A couple of weeks later you were invited to a restaurant, and a week before payday, and now you are again reaching for savings. Obviously, with this approach, you will not buy a washing machine for a long time.
How to get rid of this habit? If spending planning doesn’t help, put the money in a bank account. Not on a card, but on a deposit. The ideal option is to profitably invest your savings. So you will not only save money and save it from inflation, but also increase it, which means you will accumulate the required amount much faster.
Habit 6. Not understanding how to save money
The financial situation in the domestic market can hardly be called stable. Leaping foreign exchange rates and inflation can eat up the lion’s share of your savings. At the same time, there are financial instruments that help save money. But many people are not in the habit of using them. At best, they put money into a bank account, the interest on which can only cover inflation.
Many people think that investing is a complex and risky business, and only financial analysts and mathematicians do it. This is not true. Everyone can learn the simplest trading methods and investment strategies.
Follow what is happening on the market, evaluate different financial instruments and choose the right ones for you.
If you are thinking right now about how to start investing, open a training or brokerage account with Otkritie Investments, and you will no longer have to worry about how and where to store and increase your savings.