Answer these 9 questions to finally start saving

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Be honest with yourself if you want to find the key to financial well-being.

1. How much are you spending?

To save money, you need to earn more and spend less - this is a common truth. Not everyone succeeds in the first, and many underestimate the second. The illusion often arises that there is only enough money for food and communal services, so there is simply nothing to save on. But don't jump to conclusions.

If you haven't taken into account all-all income for at least a few months, then you have no idea how much you spend and whether you can save.

You need to fix costs in order to understand their structure. Moreover, it is not enough to do it with a “large smear”. For example, you put all the expenses in the supermarket in the category "Products" and consider them justified. And then it turns out that only 30% of the amount went to meat, cereals and vegetables, and the rest was spent on chocolate, cookies, soda and alcohol.

Start keeping records - you will learn a lot about yourself.

2. How much do you get?

The easiest way is to multiply your salary by 12 - by the number of months - and calculate your annual income. But the figure will not be entirely accurate. Their own adjustments are made by vacation pay, which are calculated according to the average earnings. You may have received a bonus or tax deduction for the year. It is worth considering all the nuances in order to understand the real state of affairs.

3. How much money do you need for basic necessities?

Determine what spending is mandatory for you. Then estimate your expenses based on several strategies, for example:

• What is the minimum amount you can live on without starving or getting into debt.
• How much do you need to live without limiting yourself, but also not boasting.
• How much money it takes to live a luxurious life.

The optimal strategy is the second: it helps to maintain a balance between restrictions and a comfortable life, to save and save wisely. The first number will help you see your real needs, and the last - to understand what you need to strive for.

You can simulate any number of scenarios for yourself. The main thing is to understand why you are doing this.

4. How and why should you budget?

By itself, information about income and expenses is interesting, but useless if not used. This data is needed to draw up a budget for the month and year. A detailed financial plan will help you take into account all large and small expenses, lay down funds for entertainment and force majeure and, of course, start saving.

5. How to save money without worsening the quality of life?

Some take a radical approach: they decide to tighten their belt tighter, buy the cheapest, limit themselves in everything. And this is a mistake. Life will become unbearable, and this is not at all what you should get along with the savings.

Don't confuse rational spending reduction with hoarding:

• If you've gone the extra quarter to buy your usual groceries for less, that's good.
• If you have replaced quality meat with a cheap semi-finished product with an indistinct composition, this is bad.

6. How much do you need to save?

Much depends on what you are saving for and whether you have savings. The first thing you should take care of is a reserve fund. This is an airbag that will help you out in case of job loss, prolonged illness or other force majeure. The savings should be enough for at least three months of normal life, and ideally for a year.

Otherwise, you set your own financial goals for yourself. But they must be clearly formulated, and the path of accumulation must be calculated.

7. What do you need to save for now?

This question logically follows from the previous one. In the matter of savings, there are sprints, and there are marathons. In the first case, you collect a small amount of money to spend in the next couple of years. In the second, you pursue more long-term goals, which you need to postpone right now.

For example, it is naive to hope for a large pension from the state - it would be more logical to save up for old age on your own. The same is with the education of children: maybe, by their age, there will be no budget-funded places in universities, so you need to financially prepare.

Often people wave their hand at long-term goals: "Suddenly I will limit myself now, but I will not live to retire." It will be much sadder if you still live, and there will be no savings by this time.

8. How much money to save?

At least 10% of all income. It is better not to go below this level, otherwise you will save up forever. But you can increase the percentage if finances allow.

If you don't know where to start, try saving 10% on your paycheck and 25% on odds and ends like bonuses, cash gifts, and so on.

9. How to store savings?

Definitely not under the mattress, especially when it comes to long-term savings, otherwise inflation will slowly but surely devour your money. For short-term purposes, savings accounts and deposits are worth considering. It's better to invest over long distances. Money should work and be profitable, it is a shame not to use its potential.

Take the time to research investment vehicles and avoid shady businesses that run the risk of leaving you penniless.