LONDON – LIVING – Although many of us fall into the trap of assuming that everything in life will go as planned financially, it’s important to save up money for emergency situations, such as an injury that requires medical attention or an unexpected car repair.
In the event you are confronted with a major cost that you are unable to pay, it can be a real struggle finding a way to come up with the money and can cause a lot of unnecessary stress.
By saving money in the right manner, however, you can remain confident that you are able to financially handle an expensive situation that happens unexpectedly.
Record Your Financial Information
Before you begin to set aside money each month, it’s important to have an understanding of your financial information, including how much you and your spouse make, all of your expenses and any loans that you’ll need to take care of in order to get out of debt.
By conducting a simple, realistic financial analysis to find out how much you can set aside each month, you should be able to avoid budgeting incorrectly and constantly taking money out of your savings account, which can be a very slippery slope.
The best way to accurately record financial information is to spend the way you normally would for an entire month, writing down every financial decision that is made along the way. By the end of the month, go through every decision and determine what is necessary and cut out expenses you can live without.
After doing so, compare your monthly costs against your monthly income and set aside as much as you can while still living comfortably. It’s also important to view your savings as an expense and avoid not pulling it out at all costs.
Set a Budget
After determining your financial information, it’s time to set a realistic budget that outlines every detail of your monthly financial records. Be sure to budget for even the smallest of items, including a budget for snack machines during work and birthday presents.
By doing so, you are able to know pinpoint exactly where your money is going and accurately set aside a monthly savings as a result. Also, be sure not to create the budget by yourself if you live with a family. Instead, consult with your spouse and children as they may think of expenses that you didn’t originally.
The thing that derails a budget the most is unexpected costs. Subsequently, it’s very important to think about every necessary expense and every possible revenue stream, which means including any small side businesses or payments you may receive into the revenue.
After everything, you should have a clear and concise idea of exactly how much you can put aside into savings each month, and you are ready to follow through a save up money in a reliable manner.
You can create the best budget in the world, detailing every possible expense you may have, but the failure to execute on the budget means the budget is a failure.
Therefore, not only is it important to put together a realistic budget, but it is even more crucial to stay disciplined and follow through with the plan that was put into place. Remember, writing a budget on a piece of paper always looks good. The execution, however, is much more difficult to achieve.
The best way to express financial discipline is to find a reason to save money for motivation. Although there are numerous reasons to save up money and everyone has their unique set of motivational reasons to put money aside, a few examples include putting money into a child’s college fund, planning for a summer vacation or simply supplying financial security in the event an unexpected cost presents itself.
In the event a realistic budget is put into place and is properly carried out with financial discipline, then you should be able to reliably save money each month.
As mentioned, staying disciplined is important. However, staying disciplined can be incredibly difficult to do, especially as the savings account begins to grow and the appeal of buying that new TV you really want can become increasingly tempting.
The best way to avoid frivolous spending is to use what is called an automatic transfer, which is a system where banks can set aside a certain amount of each of your paychecks into a savings account instead of checking without you having to manually do it. By doing so, it becomes much easier to stay consistent and disciplined and avoid the painful process of moving your hard earned money into a savings account yourself. Almost all banks allow for automatic transfer, so be sure to take advantage and make saving money much easier.
Also, it’s best to think about your savings each month as another expense, which means you won’t have access to it after it is in your savings account, avoiding unnecessary spending of the treasured money. An automatic transfer is a fantastic way to ensure the savings money isn’t mishandled.
Keep It Simple
Lastly, be sure to keep saving money in the right perspective. Although it may seem difficult to save $5,000, it only takes small amounts over a long period of time in order to do. Subsequently, the key to saving money – regardless of the amount – is to stay consistent and give yourself time.
When dividing $5,000 up on a per month basis, it amounts to a little over $400 each month, which is around $100 a week and $15 a day. Coming up with $5,000 in one year can be as simple as refinancing a car payment and finding a more cost-efficient way to eat dinner each night.
As long as you record your financial information accurately, create a budget around the financial information and stay disciplined and consistent, you should be able to create a savings plan that works well in a fairly short amount of time.
If you have any helpful tip and tricks for saving while on a budget, leave a comment and share your best advice in the section below.