We all know we should be saving and we hope to accumulate some savings as we go through life.
But do you actually know HOW to start saving? Also, do you know WHAT you’ll actually be saving for?
Making sure YOU’RE the one who’s in control of your budget will help you get clear.
We find most people only have a fairly vague idea on how to start saving. Mostly they make it up as they go. If they do actually manage to save some money, they then often look for something to spend it on!
The problem with having not having a clear idea on how to start saving is that it makes your savings pattern really ineffective.
It’s like anything else in life. The more you put in, the more you get out.
Question: “How to start saving?”
With focus and a clear plan, you’ll get better and faster results. It’s therefore very important to have a simple savings system in place. However, if you really want to turbo charge your savings then make sure your budgeting system runs on auto pilot!
You see, it’s consistent effort that will get you to your budgeting goal.
Running your budget on auto pilot means that once you’ve decided on your goal and set up the auto pilot to take you there, you can actually take your hands off the wheel and go do other things!
A handy piece of advice is this: set up a regular direct debit from your main bank account to a savings account which is with another banking institution. The less often you see your savings account, the less likely you are to dip into it.
It’s the old adage: Out of sight, out of mind!
Next question: “What are you actually saving for?”
A reason many people give in to temptation and dip into their savings is that they’re not quite clear on what they’re actually saving for.
‘A rainy day’?…what does that actually mean..?
There’s nothing wrong with saving for a holiday or new furniture or any other luxuries. But beware: Not all savings are the same!
When we talk about ‘savings’, think of them as your ‘life savings’. Everything else is really just a spending fund. You wouldn’t just blow your ‘life savings’ on a holiday, would you?
Life savings are there to plan for your retirement. As they grow they will change form. Cash in an online savings account maybe become a term deposit, then may be a little investment, some managed funds, shares, property or a business.
This is NOT money for spending along the way! It’s strictly for growing, investing and re-investing, so that one day you can actually afford to live in the style to which you’ve become accustomed.
Keeping separate accounts to save up for luxuries is a good way to distinguish between these ‘savings’ purposes.
So: “Why do you need to Do-It-Yourself?”
When people feel overwhelmed by their finances and stressed about debt, they often feel they’ve failed miserably and just want to hand it all over to someone else.
On many levels, that’s the worst thing they can do!
Firstly, they’re simply running away from the problem. The problem is that they don’t really know how to manage their money and how to start saving. So they actually need to learn!
You can’t possibly learn financial responsibility by handing it over to someone else who then just gives you pocket money as if you’re a child. You’ll be dependent on that person forever.
By not managing your own money, you’re also deprived of the opportunity to get clarity on why you’re saving and what it’s all about.
This is about so much more than just money and savings! When you sit down to put your budget together, you’ll actually need to reflect on what your key goals and values in LIFE are. You actually get the opportunity to take time out and do some life planning.
What a wonderful side effect of preparing a budget!
A life plan is as important to your life as a business plan is to the business person.
And remember Confucius say: “Man shoot at nothing, sure to hit it!”
How to start saving is NEVER as difficult as you think. In fact, it’s actually fairly easy and straight forward to set up a regular savings and debt repayment system once you know how.
You’ll feel amazingly empowered as you take charge of your finances, learn a new skill and get excited at setting new goals for your life.
So go for it! Learn how to start saving and be sure to ‘do-it-yourself’!
Miriam Castilla is passionate about teaching you how to be money smart.