Rules For Saving
Remember Aesop’s fable of the grasshopper and the ants? When winter came, the grasshopper went hungry because of a lack of adequate preparation. The story is used to teach children the value of hard work and saving.
Today’s world promotes spending making saving up very hard to do. Temptations abound everywhere. However, adequately preparing for the uncertain future can certainly help when the unforeseen strikes.
Saving money provides you with a benefit you may not immediately feel. However, this does not and should not detract from the importance of saving money.
The most obvious advantage of saving up is of course, extra money. But don’t get tempted yet.
Saving money will give you extra cash to use for emergencies like illnesses, accidents, natural disasters and sudden loss of a job. You won’t have to go into debt to handle such events.
If you have a healthy amount saved, you won’t have to use credit to purchase a high ticket item. You can avoid the repercussions of going into debt.
Saving up also gives you a headstart on the future. You take control of your future when you save up for college, a house, a car or even retirement. Your future won’t be so uncertain when you know that you’ll have a cushion to land on when things go wrong.
Here are a few rules for saving you should remember.
Budget
Start your savings program with a budget. Will you be using a monthly, quarterly or yearly budget? A monthly budget is easier for most people as bills come every month.
Determine your income. How much money will you make in a month after taxes? Will you have any additional sources of income other than your paycheck?
Determine your expenses. Some expenses remain fairly constant like your phone, water, cable and light bills. If you pay rent, this should be another constant expense too. You will need to determine which expenses fluctuate monthly. These can be your food, gas, clothing and entertainment expenses.
Now that you’ve determined what your expenses are, eliminate all unnecessary expenditures.
Record all your income, savings and expenses faithfully and diligently.
Create a savings plan
Set a goal. How much money will you need? How much should you save to reach that goal in a reasonable period of time? If you’re saving for the future, most experts would suggest having at least enough to cover three to six months worth of expenses.
Always keep records. You will want to know how much money you have already saved and how much you have spent.
Invest wisely and carefully. You can use your current savings to create even more savings by participating in low risk investments.
Create a savings account. There are many types of savings account available. You can choose from the most basic of accounts to a high yielding savings account to a money market account.
You can even encourage your children to save with a piggy bank. You can accompany them to the bank to open their own account once the piggy bank is full. Start the concept of saving while they’re still young and they’ll naturally imbibe the virtue.
Spend less. This is the difficult part. The trick here is not to stop spending but to moderate your spending. Cut back on eating out. Have home cooked dinners instead. Pack lunch to work. Your packed lunch will cost less and will most likely be healthier for you than takeout fare. Cancel your cable subscription if you don’t watch TV. If you can get your internet without a phone line, go ahead. If you’re mostly on the road, a landline may not even be necessary if you have a cell phone.
Pay off your debts religiously. Interest on debts can drive the cost of your debt all the way up. Once you’ve gotten your debt out of the way, you can now start on your savings plan for the future. And stay out of debt.