Through research, I discovered that most people, especially youth, find it difficult to save money. They are always after the latest technology, phones or trending clothes. They turn to spend more of their total income compared to their expenses. I often ask myself, do these people have plans for saving their money, or do they want to live life in the present moment? What if tomorrow things change? Will they be able to keep up with the type of lifestyle that they have set for themselves? I personally discovered that saving at an early stage can give you financial freedom after retirement, and it helps you to achieve your long-term goals. Making a saving is like seeing your money grow every day.
From what I have learnt from socialising with people, reading books, and research, in this article I will share 5 common practices that people use to save money in the present day. I observed that people have similar mindsets and methods when it comes to saving money. This article seeks to educate everyone on how to save money.
Disclaimer: Please keep in mind that everything shared in this article, 5 common practices to save money, is based on my personal observations and research.
- Track daily expenses
To start saving, you have to be knowledgeable of your daily expenses; that involves recording every dollar that you use. This allows you to have an overview in terms of where your money is going. To track your expenses successfully, you have to record your everyday transactions, group all spending into fixed spending and variable spending and lastly review your spending mostly at the end of the month and identify recurring costs.
Mostly our brains are not good in terms of doing financial calculations. We tend to remember big purchases that we have made while ignoring small purchases. Therefore, tracking financial expenses allows us to appreciate our spending pattern.
While researching this topic, I observed that most people, even if they use tracking apps, often disconnect a few days after trying to record their expenses. Secondly, we don’t feel pain spending on a small fee like buying a drink, unlike when we buy something big. Therefore, tracking allows recording of such expenses, which we tend to ignore.
- Create a budget
A budget is a prescription where you tell yourself, ‘This is what I am going to do.’ It is a spending plan that allows you to allocate your monthly income before you spend it into specific categories like saving. It allows you to cut unnecessary spending.
A budget works because it gives you a roadmap that directs you to your dreams by breaking down your goals into manageable steps. If done properly, it allows you to stay prepared for the future uncertainties. To save money through budgeting, choosing the right budgeting method is crucial. Most people use the following budgeting methods: zero-based budgeting, envelope budgeting and 50/30/20 budgeting methods. Finding the best budgeting method that works for you is key.
Often, I have realised that people do create budget plans, but they fail to stick to their budgeting goals, and in the end, they end up misusing budget-allocated funds for other purposes. More people set unrealistic goals which are impossible to achieve based on their salaries, and at the end, they fail to meet their goals. Therefore, to save money, creating a budget and sticking with it and setting realistic goals are crucial.
- Reducing unnecessary spending is crucial.
To save money, it is crucial that you do away with those types of spending that you do not necessarily need, like subscription fees, unplanned purchases and eating out. It means that you identify and eliminate purchases that you make which you basically can live without.
By cutting unnecessary cost It allows you to have extra coins that are available that you can allocate to saving. Cutting small recurring daily expenses like $5 when saved for a year can become so much, like $1625, which can mean a lot depending on your status.
Through my research, I uncovered that most people plan to save money and still continue to pay for unnecessary costs. If you cut those unnecessary costs, you can save more money that will take care of you in the long run. It’s hard to let go of a habit, but letting go can save you and open new possibilities for you.
- Small amount of savings.
It is a habit that you develop where you get to save a certain small portion of money either every day or every week. For example, you can plan to save 5 dollars or 10 dollars every week until the end of the year. The key is consistency.
When you keep saving money in small amounts, it will frequently grow without you realising it. The goal is to choose the small amount that you are able to save every day. Small savings allow you to work on your long-term dreams. Saving small amounts also works, especially when you want to cut down on spending habits.
Most people fail to be consistent when trying to save money. They do it for the first few months or days, and once they feel exhausted, they end up forgetting that goal. In order to successfully save money, I discovered that consistency and commitment are key.
- Saving goals
In order to save money, setting and identifying your saving goals is crucial. It allows you to stay motivated, and it gives you boundaries in terms of your spending limits. It is crucial that you put your goals into categories like short-term goals (paying insurance and paying student loans) and long-term goals (like retirement plans, buying a house and travelling around the world).
I realised that through my research most people do save money, but they save for the sake of saving without saving goals. Saving without saving goals keeps you demotivated. Also realise that people saved their money in terms of assets because assets can grow. Thus, they put their money where they see that it will gain more value.
Summary
Saving money is crucial, especially for the long term. Saving your money the right way gives you the freedom you need to live the life you want. Starting the process of saving money can be a bit tricky because it pushes you to sacrifice your daily lifestyle and live the lifestyle that you never planned for. Through my research findings, I have managed to share with you the step that you can possibly use to save money. Saving money creates a safe future for you in the long run.