In the world where we are constantly told we need things because without them we mean nothing, for many, it is hard to create some savings. We need some extra money, though, not only to have some sense of security in life but also to make our future life easier.
In this post, I want to encourage you to have some savings and to show you really simple steps to do so.
The first obvious way to create some savings is spending less than we earn. I know it can be hard for people who have a minimum salary and every month struggle to make ends meet, but also in such situations, we can look at our spendings and decided if maybe there is at least one thing we do not need to spend money on.
Create a budget
I am not saying you need to do it to cut your spendings dramatically, but I know the majority of people do not know what they spend their money on. If you are not patient with such things, maybe decided to look at your budget just for 3 months, even such a short period of time should give you a general view how much you spend and what do you spend money on. There are numerous apps that help you create a budget, but you can just use good old pen and paper.
The key is to write down any single spending, again not because you want to terrorize yourself, just to know yourself. When you know more about your spending manners, you can create some saving- friendlier budget for the future. One thing in a new budget is crucial and it is called ' pay yourself first'.
Pay yourself first
I am sure you have heard this term before. It is simple and elegant. Moreover, it works! The idea behind this is also simple, you treat your savings as spendings, you do not save what is left at the end of a month, but you save a particular amount of money at the beginning of each month. There are different opinions on how much you should save, I will say, save as much as YOU feel comfortable with. In my opinion, even 1% of your income saved is fine, it is much better than not saving at all, right? With time, you can increase the amount of money you can and want to save.
So, for example, what I do every month is transferring some % of my income to my savings bank account. So far it has been about 10% of my monthly income, this year, though, I am going to work less, so probably I will save 5%, but I will stick to my plan. As you can see in my example, it is good to have not only checking account but also savings account. I think all banks all over the world offer 1 or even more of saving accounts, so there should be no problem for you to have one.
The interest rate in such accounts is rather limited, probably some 0.5%, but you can look for an account that adds this interest rate every single day or month. Why? Because of the compound interest. With time you will receive an interest rate on the interest rate. I hear you say it may be just a small amount of money, but hey! You will get nothing if you do not do it. Remember, money makes money, honey!
Save and invest
With time, when your saving grows to the amount you wish, you can save the money in a bit different and/or more profitable way. You can leave some certain amount of money on your savings account, just to have some emergency fund. How much, again, it depends on you and the place you live in. The rest of the money you can locate in some fix deposits in your bank, or for those who are not afraid, you can invest this sum in mutual funds. I know that people who never have invested are a bit worried to do so, especially in our current times, but in a long term, say over 5 years, your money always create an income. If you want to invest, though, always remember to invest only the money you know you will not need and only the sum you feel comfortable to invest. Banks and financial organizations have a vast offer of fix deposits and mutual funds, with different risk, so as a beginner you may want to choose the funds with lower risk. Each mutual fund has a number, form 1 - 6 ( or higher), where 1 is low risk, whilst 6 is high risk.
Two things I want to point out very clearly:
-always check the mutual funds and the financial organizations that sell them,
-never believe any organization that says you will earn unnatural % of the money! Simply, it is impossible, especially when interest rates all over the world are rather low.
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