Increasing your savings is the most effective way to build your wealth. Saving opens up opportunities to you to invest your money wisely, or to enjoy yourself when you need to take a break. Saving for a holiday makes it so much more enjoyable when you know you’re not going to be paying it off later.
How often have you come across an opportunity to invest your money only to discover you’re not in a position to invest anything? Savings provide you with a stash that could allow you to take up unique opportunities when they present, and it is often these one-off opportunities that can prove to be the most lucrative. When people around you present you with opportunities, you want to be in a position to get in on the ground floor.
How much more assertive would you be at work if you knew you weren’t relying on your next pay cheque to pay the rent. When you have savings behind you, it makes you less inhibited by the consequences of being a bit more assertive. Employers invariably reward those who have a bit of spunk, and aren’t afraid to take a bit of risk. In a free market, it is risk that brings the most reward, and a comfortable level of savings will make you less risk averse.
Most of us have been in a situation at some time in our lives where we are living from week to week, sometimes hand to mouth. Whilst it’s a normal rite of passage in the free market economy to start off living on the breadline, savings empowers you to make decisions that are not necessarily based on short term financial gain. If you start by just saving a little bit each week, you’ll soon build up a bit of momentum and the sky is the limit.
It doesn’t matter how much your planning to save each week, you should always setup a separate bank account to keep your savings in. Most banks will offer a free account that you can put your savings into, as most everyday transaction accounts pay very little interest. Having a separate savings account allows you to watch your savings grow directly, and if you pay into your savings account as soon as your pay goes in, eventually you will learn not to miss it anymore.
Once you learn to live without spending the extra money you are now saving, you should try and stick to the same budget. If you get a pay rise, try and put most of that money into your savings plan rather than just spending it on materialistic things you’ll soon forget about. Always remember that savings is about good habits and being considered in your spending activities. You should budget for a bit of entertainment and maybe some clothes, but don’t go and blow your savings on things you don’t need.
At some point, you do need to spend the money you have been saving. It’s important that you have a goal so that you can motivate yourself to save, and not to use it on the kind of things that made you a bad saver in the first place. If your weakness is clothes, don’t save a thousand dollars so you can buy a new jacket. Use the money for experiences rather than things. You will find the reward stronger and you incentive will build.
So there you have a bit of an introduction to savings. Saving money is a skill that improves with time and momentum, and the younger you start the easier it becomes. But always remember, it’s never too late to improve your savings habits.