Saving does not come easily for most of us, and for few people, it is a positive pain (yes, that includes me, too!). However, as I pointed out in my previous articles, saving is an absolute necessity, if you want to start investments, and move ahead on the path to financial independence and freedom. So, What does an average person like you and me have to do to take the pain out of saving money.
Well, you can follow the seven steps that I will just list down. But a word of caution before you start reading further – this is not going to be an easy journey. Some of the steps listed below require positive effort and a measure of self discipline. If you are able to heed them, you will find the pain gone out of your saving efforts!
So, here are the seven tips to make saving easier for you -
1) Reduce your Consumption -
Easier said than done! After all, this is the age of consumerism! But remember, the money that you are spending is the money you will NOT be able to save. This certainly does not mean that you turn yourself into a penny-pinching miser. It just means cutting back on unnecessary spending. what is unnecessary for you is a decision that you will have to make yourself.
2) Have a Vision –
This tip works on two different levels. First, it means that all saving should be directed toward a well defined end – even if it is as simple as purchase of furniture. On another, higher level, you can visualize the convenience, the ease and the independence that you will definitely achieve if you save judiciously.
3) Get Rid of Debt –
Well, some of debt may be necessary, and not very easy to get rid of – for example, your home loan. But it is certainly a good idea to close smaller loans such as personal/small ticket loans, which carry a high rate of interest and eat into your income. And the first item of debt that needs to be tackled is your credit card balance. Most credit card companies and banks charge 1.5 % to 3% on the outstanding balance, on a MONTHLY basis. If you invest a sum of money at this rate, you can double your investment in less than three years!
4) Automate –
The current state of technology allows us to automate many of our money related tasks that could help a lot in saving. For example, you can set up a “sweep in” facility that is offered by most of the banks. This facility essentially involves setting a limit in your savings acount, and any amount that accumulates over that limit is automatically transferred to a higher-interest account. Neat, isn’t it? In addition, you can also automate your credit card payments and phone bill payments.
5) Consolidate –
Consolidation of your personal finances can also help you a lot in saving money. For example, if you have more than one credit card, and outstanding balances on all of them, you can use the balance transfer facility to consolidate your debt into a single card (choose a card with the lowest interest rate). And why would you need five savings accounts, especially if all of them entail a minimum balance? One, or two (if needed) accounts will suffice.
6) Make a Budget -
A personal budget helps to put your personal finance in black and white, and provides valuable perspective. A personal budget can help you to plan and prioritize your expenses, and helps to inculcate the all important financial discipline.
7) Reward Yourself –
In a sense, this point is derived from the first tip – which says that you should cut back on your consumption. That does not imply that you should start living BELOW your means. Whenever you reach your savings milestones, reward yourself. Go out on a holiday, or buy a gift for someone (or yourself, if you please!).
The above seven tips can go a considerable length in helping you to make saving a painless experience.