CEBU, Philippines - It’s in everyone’s mind that life is getting hard these days. This, of course, is a perception that’s open for argument. Some people say that they have less purchasing power now; others say that people nowadays just have more desire for things.
Whichever way one looks at the present situation with money, there’s no question that there is need to save. Many people find it difficult to do. But according to the Bank of America, in its website www.bankofamerica.com, “Sometimes the hardest thing about saving money is just getting started.”
In the face of the various daily temptations to spend, it can be really difficult for one to figure out simple ways to save money, even to hold oneself back from spending unnecessarily. The Bank of America website shares some money-saving tips to help one develop a realistic savings plan.
Record your expenses. The first step to saving money is to figure out how much you spend. Keep track of all your expenses – that means every coffee, newspaper and snack you buy. Ideally, you shall account for every centavo. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Your credit card or bank statements, if any, can help you with this. If you bank online, you may be able to filter your statements to easily break down your spending.
Make a budget. Once you have an idea of how much you spend in a month, you can begin to organize your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income – so you can plan your spending and limit overspending. In addition to your monthly expenses, be sure to factor in expenses that occur regularly but not every month, such as car maintenance etc.
Plan on saving money. Now that you’ve made a budget, create a savings category within it. Try to put away 10–15 percent of your income as savings. If your expenses are so high that you can’t save that much, it might be time to cut back. To do so, identify non-essentials that you can spend less on, such as entertainment and dining out.
Tip: Considering savings as a regular expense, similar to groceries, is a great way to reinforce good savings habits.
Choose something to save for. One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for – anything from a downpayment for a house to a vacation – then figure out how long it might take you to save for it.
Examples of short- and long-term goals:
Short-term (1–3 years): emergency fund (3–9 months of living expenses, just in case), vacation, downpayment for a car.
Long-term (4+ years): retirement, your child’s education, downpayment on a home or a house remodeling project.
In saving for retirement or your child’s education, consider putting that money into an investment account. While investments come with risks and can lose money, they also create the opportunity for compounded returns if you plan for an event far in advance.
Decide on your priorities. After expenses and income, your goals are likely to have the biggest impact on how you save money. Be sure to remember long-term goals – it’s important that planning for retirement doesn’t take a back seat to shorter-term needs. Prioritizing goals can give you a clear idea of where to start saving. For example, if you know you’re going to need to replace your car in the near future, you could start putting money away for one.
Pick the right tools. If you’re saving for short-term goals, consider using PDIC-insured deposit accounts: regular savings account; or time deposit, which often has a higher interest rate than a regular savings account. Your bank can give other, better options.
Make saving automatic. Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money to, or even split your direct deposit between your checking and savings accounts. Automated transfers are a great way to save money since you don’t have to think about it and it generally reduces the temptation to spend the money instead.
Watch your savings grow. Check your progress every month. Not only will this help you stick to your personal savings plan but it also helps you identify and fix problems quickly.
Again, it is always a good practice to save money on a regular basis. Life offers no guarantees. Even if one’s financial standing is okay now, there’s always the future to save for. Who knows what needs or wants one will have by then? (FREEMAN NEWS)