The key to financial freedom is learning how to master the fine art of financial discipline. Saving money on a regular basis regardless of what your income may be is an activity that should be routinely performed by those seeking to improve their financial status.
This seemingly simple goal of saving money is one that many people struggle with on a consistent basis. Some people do manage to save on a short term basis but a great many fail to hang onto their savings long enough to realize the full potential and value that is afforded by having substantial amounts of money set aside.
The practice of consistently saving money is a habit that can easily be learned if you are willing to be patient and take five small steps.
1. Pay Yourself First
When you receive your pay check you should think of your savings account as a bill or a debt that is owed to you. You should always place money into your savings in the same manner as you would routinely pay a bill.
2. Automatic Deductions
Saving through automatic deductions at your bank is number one on my list of ways to add money to your account. You simply decide upon the amount that you want to put away and the frequency and have your bank transfer the money from your checking account into your savings. Using this method you never really see the money so the temptation to spend is significantly reduced.
3. Keep the Change
Saving the change that you collect each day is a fun and easy way to save money. Each day when I come home, I take all of the change that I have accumulated throughout the day and put it in a canvas bag. After about six months to one year of accumulating the coins, I take the money to a coin machine where I do my grocery shopping and cash them in. This simple method surprisingly yields several hundred dollars on each occasion.
4. Pay Yourself Interest
If you have a savings account that periodically pays interest pay attention to when the interest is credited to your account. When the bank’s interest appears in your account, transfer or add additional money to increase the amount of savings. For example add enough money to bump your savings up to the next multiple of ten.
5. Save Unexpected Money
It is always nice to receive unexpected money such a gift, reimbursement, tax return, or a bonus. Since unexpected money is money that you did not plan on having in the first place, you can always spend a little bit and put the remainder in your savings account.
When starting a savings plan it is important not to over extend yourself to the point where saving becomes a burden. Putting money in a savings account this month and withdrawing it next month only defeats the purpose. The idea is to put money away and not use it, and it is this very concept that is difficult for many people to understand. Financial freedom means not having to worry about unexpected emergencies so having a substantial amount of money set aside can greatly reduce this fear.
The amount of money that you save is not important, it can be a few pennies or hundreds of dollars. The key objective of this goal is for you to develop the habit of routinely saving a portion of your earnings.
The discipline acquired through the development of this good habit will carry over into other aspects of your life and make it easier to accomplish other personal and professional goals. Start a systematic savings plan today and move one step closer to financial success.