Many of us would agree that saving money is an essentially important part of our daily activities yet, don't know exactly how to start and sustain it.
When I was a young kid, I was taught the value of saving money and the very traditional way of doing it - saving a few amount and putting it in a bank. That's it! There were no specific instructions or rules given on how to achieve this task and how I will manage to sustain it.
These 5 simple rules is what works for me and surely may work for you too. I wrote them here so I can always remember on how I did it and to help others who wishes to get themselves on track to saving wisely.
1. Set your purpose for saving money.
Just like with any other things you wish to do, you've got to have a roadmap on where you plan to go. Saving money is no exception and you should know where to put your money on and for what purpose.Knowing your goal and purpose for saving money also serve as an inspiration. It is an index to your faithfulness to save.
Some examples of purposes for saving money are: Retirement Plan, Children's College Education, Buying a house, and Emergency Funds.
2. Start now and just do it!
Just with any natural laws of Physics, it takes more energy to move an idle object. It is the same thing with habits, the hardest part is always to get something started.
The best time to get your savings habit (if you haven't done so), is to start NOW! One of the best advise I got on getting things done was from a Nike commercial that says: "Just do it!". When I strongly believe on something that I know is right for me, I just do it , take it head on and not ask too many questions- period.
So, instead of being critical about things while you waste time thinking, getting it started NOW and think as you move along is the best way to make things done.
3. Pay yourself first.
This is nothing new but rarely done. This means that before you pay the government (for taxes), your utilities or mortgage; you have to pay yourself first.
Most often than not, I hear families do it the other way around - pay the bills first then what ever is left will be for savings. This is a HUGE, HUGE mistake that is why many unsurprisingly, never save enough for their future.
How much should you be saving? A rule of thumb is to save between 10% to 15% of your gross monthly income - I save 17%. If your in your middle thirties and haven't really saved much, I suggest you to save as much as possible including some windfalls like bonuses or cash gifts. Catch up on the lost years that you haven't.
4. Do it automatically.
One thing I don't and never plan to do is budgeting. So you ask how I manage my savings without budgeting? I do it automatically!
Doing it automatically means 'automatically' deducting my income (be it for my insurance or managed funds) before it even reaches my hands. This way, I don't get tempted to use my money from other purposes I don't intend to buy. Discipline is something I don't have and so I work only with whatever income is left after deducting 'automatically' for my savings.
5. Do not keep it in a bank!
For many of us, we put all our savings in a bank where it only grows 1% per year. This is precisely the reason why I never put my nest eggs in them because you virtually inhibit your money from growing.
Be wise and put your money on managed funds or other investments where you have complete control on how your money is invested on. Many managed funds have at least an annual compound interest rate of 10% per annum.
Would you still keep it in a bank?
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