We have previously spoken about the habits of financially healthy people (Can hyperlink the previous post). One thing that all financially healthy people have in common (and we salute you all for that) is the ability to save. And by ability, we mean motivation, consistency and vision. Let us talk a little bit more about it today.
Why should you save at all? To secure your potential future needs with the certainty of your present income. As a thumb rule, you should be saving at least 30% of your income every month. You might be wondering how one arrives at that number. Let’s see how.
Many people believe that you should be saving as much as 60-70% of your income but 30% is still the number you should be starting from for a couple of reasons. It is the bare minimum amount of money you should be saving to maintain your lifestyle once you’re no longer bringing in a steady income. This also accounts for the cost of living, insurance, healthcare and inflation as time goes by.
Saving at least this amount allows you to experience the best you can in the future without having to compromise on your lifestyle in the present. It is possible to secure both without being extreme if you’re smart about it.
In order to make sure you stick to it once you start, here are a couple of tips:
- Always think about how much you save in percentage form so whether your income goes up or down, how much you save moves accordingly.
- Put your money into savings before any other purchases, rather than after; savings are not optional, they’re essential, and you’ll only be able to save it if you prioritise it. Budget all your other expenditures around the amount that remains.
- Set up a new account specifically for your savings and set up auto-debit to remove the temptation of not saving one month or the other.
Once you get this going, the money will basically just save itself. You will constantly have to fight many impulses to keep doing this but it’s well worth the compromises and energy to do so.
So now that you’ve got your own personal savings system in place, what do you do with all these savings? Invest! And that is what our next blog is about.