Let’s face it: money is something we need to learn how to handle if we want ourselves to achieve our goals. But many of us find ourselves living from paycheck to paycheck and unable to save money after spending on our basic needs and the needs of our family or giving in to our spending whims.
With a little bit of adjusting with your spending and saving habits, it’s possible to build your savings and increase your net worth in between paychecks. Here are tips on how to build a good foundation for your finances in order to make your money work for you:
1. Have a concrete goal
When working with your money, it’s always a good idea to know exactly what you are working towards, so you can have a goal you can focus on. Perhaps you’re saving for a new home or a new business or clearing out debt you’ve accumulated over the years.
2. Start saving up, no matter how small
Once your paycheck comes in, make a conscious effort to make your first expense for yourself by immediately setting aside a fixed amount per cutoff, before spending on anything else. A good rule of thumb would be to spend 50% on your needs, 30% on your wants, and 20% on your savings. It’s important to keep this money in a separate account from the one you use for regular spending, so as to prevent yourself from dipping into your savings.
3. Cut out the non-essentials
Think about the premiums you pay for convenience in your life, and consider which ones you can do without. Things like having food delivered, eating out, or buying coffee from outside might be adding a lot to your daily expenses; it’s much cheaper to buy ingredients and just cook for yourself at home. It’s possible to save more money by choosing to live below your means.
4. Get out of debt
Being in debt means that you are spending more than you can afford and that most of your money is going into paying for interest. Paying off your debt will set you free and allow you to put your money into your future by saving up for a new home, starting a business, or investing. If you are looking for a way to start, you might want to adopt the snowball method, which entails paying only the minimum amount for your debts, focusing on fully paying one small debt at a time, then moving on to another until you finish them all off.
5. Budget your money
Creating a budget will go a long way in helping you manage your expenses, and even save money. Ensure that your basic needs such as food, transportation, rent, and other essentials are taken into account. There are many available budget-tracking and expense managing apps on the App Store and Google Play to help you do this. Don’t forget to make room as well for your savings in your budget.
6. Put your savings in investments
Once you’ve gathered enough savings for emergencies, consider putting your money into investments. Avoid leaving your money in deposit accounts that yield low-interest rates. Select your investments carefully based on your own risk appetite; it’s a good idea to have a mix of investments including mutual funds, stocks, bonds, and real estate.
7. Find more ways to make money
If setting money aside really isn’t an option given your current income level, consider looking for other ways to make money. There are many freelancer platforms available online that might be looking for people with your skills–these can include writing content, managing social media platforms, or teaching English. You can also look into starting your own venture, perhaps baking cakes or cookies, or looking for items to resell. Having an extra source of income is a surefire way to help you save money for your future.