It is very important to save some money for a rainy day. Some savings come in handy when you need some cash for an emergency. We are encouraged to save from the moment we begin earning. It is one of the habits which shows financial responsibility. According to financial experts, we should save 30% of everything that we earn. While it sounds like a small fraction, it can actually be a big amount if you are earning little money in total. So how can you save money without straining when you have a small income? Here are the most effective strategies to save money without feeling deprived.
Track your spending
When you feel like you are deprived, it is often because there isn't much money in your accounts. To save during this period, the first objective is to find out where your money is going. Begin by tracking your spending. Maybe you have unnecessary costs which are draining your accounts. Dominique J. Henderson, Sr. of DJH Capital Management indicates that you have to know where every single dollar that you spend is going. Take a look at your bank statements. They will show you how much your utilities and other needs are costing you. Examples of needs that you could have include food, utilities, insurance, transportation, rent ant debt payments. On the other hand, you could be having luxury costs such as TV subscriptions, Internet, nights out and restaurant meals. By looking at how much your needs cost and the amount that you are spending on wants gives you an idea of how much you can save per month without feeling deprived.
Learn more : 7 Quick Tips on How to Budget Your Money Wisely
Begin by paying yourself first every month
Paying yourself first means that you should save first before handling any costs at all. Your savings should come first and not be the cash you have left over. How can you do this consistently? You can set up your savings account such that you automatically deduct savings from your salary as soon as it arrives. This approach is often used for retirement and emergency savings accounts. A good tip is to dedicate 10% of your paycheck to saving for retirement and emergencies. By doing this from a young age, you can begin to save without feeling deprived.
Begin saving when you are young
When you are young, time is on your side. This means that you have many years to save for retirement or emergencies. The earlier you begin saving, the less money you have to save over time. This is because of the power of compound interest. For many people, the savings target for retirement is $1,000,000. If you begin to save at the age of 23, you only have to save $14 every day at an average return rate of 6% to be a millionaire by age 67. However, if you start saving at 35 years old, then you have to save $30 to be a millionaire at 67.
Utilize the company match
If your company offers the chance to match your 401(k) retirement savings, then you can take advantage of it so as to save more money without feeling deprived. The company match works such that they will deposit a matching amount of money in your retirement account up to a specific point. If you decide to save 10% of your salary in the retirement savings account, then your employer company will deposit the same amount for you. The catch is that you have to sign up for this matching arrangement first. Therefore, you should use this method to save if your company provides this opportunity.
Save any surplus money that you get
You could come upon some surplus money that you had not foreseen. In case this happens, make sure that you bank some of it as soon as you can. Examples of surplus cash sources can be birthday gifts, bonuses or windfalls. When you get this amount of money, bank it right away so that you do not even face the temptation to spend it. This is an effective way to save money without feeling deprived.
Invest any spare change that you have
We all find ourselves with a few coins left over at the end of the day. Did you know that you could invest them and direct the income to your savings account? There are applications which are made specifically for this purpose. An example of such an application is Acorns. This application helps you to manage your spending through the day and directs any spare change to investments. It rounds up all your purchases to the nearest dollar and invests the excess. Using apps like Acorns is a smart way to save without feeling deprived.
Use a budget
Money is a resource which needs to be managed. One of the tools to do this is a budget. This is a plan that shows how much you have at hand for spending and the ways in which you spend it. A budget can show you how your expenses relate to your income. In doing so, it helps you to limit overspending and put something aside for the savings account. You can create a daily, weekly or monthly budget. This can be done manually or with the assistance of dedicated applications. Using a budget to calculate your expenditure and savings amounts is an effective way to save money without feeling deprived.
Set savings goals
To save consistently, you need some motivation. A goal can give you the drive required for saving. What do you want to do with your savings? Are you putting money aside for retirement or to invest in a house? Are you saving for college or for a vacation? These are goals that you can use to motivate your saving effort. Find something important to you and start putting money aside for it. This will help you to save without feeling broke because you will be too enthusiastic about achieving your target.
The Important Take Away
Saving money is a good financial habit. It can help you to put aside money for anything you desire. It is advised that you begin saving early in your life so as to enjoy the benefits in full. The tips above can help you to save without feeling broke. They are sure methods to develop the discipline of saving and improve your financial situation over time.