Saving is something we all strive to do, on a monthly basis, but we are not always successful, at least not as much as we hope. It is hard sometimes (most of the time) to control your spending and keep track of why your monthly salary vaporizes. However hard it may be though, it is not impossible, and that is what we are about to prove to you.
How, you ask? With 6 simple steps that will have a huge magical effect on your financial situation, forever. With the following 6-step plan, you will be able to achieve all your saving goals and without having to suffer every month. Start reading and Happy Savings!
Step 1: Track your expenses
The first you should do when you get your monthly salary is to start a tracking system for your money with which you can track how much is getting in and how much is getting out. This way you will be able to avoid blind overspending which can put you in a dangerous situation later on in the month when and if you need the money for something urgent.
At the beginning of every month, write down the total amount of money you have, then divide your expenses into two categories: fixed and changing. In the fixed expenses category, include your rent, bills, basic grocery needs for the month, and all the expenses you have to pay on a monthly basis. While in the changing expenses category, you can include the occasional purchases and expenses, such as eating out, holidays, shopping, and so on.
Step 2: Decide on a budget
Now that you know where your money is going and what exactly are the expenses consuming it, you will be able to realize what expenses are unnecessary or can be cut off. And once you know, you can start making the needed changes. For example, if you are buying coffee every day of the week, this would take a toll on your budget, so cut it down to twice a week and make your own coffee at home for the rest of the week. Now that extra amount of money can be added to your savings.
Savings= Your income – Your expenses (necessary and unnecessary)
Therefore, if you want your savings to increase, you will have to cut down your expenses, and that can be achieved if you set a limited budget for yourself to spend from across the month.
The ideal percentage that should be saved from your income is 30%. If you exceed that percentage, then you are doing an incredible job. Consider any savings above the 30% limit a reward which you can use to spoil yourself a little bit every once in a while. However, if your savings are under the 30% limit, then you need to make some bigger changes and cut down some more expenses.
Step 3: Pay off your debts (if you have any)
Now that you have a fixed budget to move within, take out a certain amount of your 30% savings and dedicate it to paying off your debts, such as personal loans, credit card bills, or any sort of installments. Try to dedicate at least 5% of your savings to paying off your debt.
Step 4: Start an emergency fund box
Now that all your expenses and debt installments are covered, it is time to set aside a fixed budget for emergencies. Or in other words, an emergency fund box. For this, you will also need to dedicate at least 5% of your monthly savings. This money is to be kept aside and not touched except in the case of emergencies, this will help put your mind at ease because you will know that you won’t have to worry in case of any emergency or financial crisis.
Step 5: SAVE!
Now we have reached the main and most important part of our plan: actual SAVING.
You have now covered your expenses, debt installments, and emergency needs of the month, the remaining amount represents your savings for the month, and it should estimate by 20% of your total income.
Once you know how much exactly you are able to save from your salary every month, make sure to transfer that amount to your personal savings account as soon as you receive your salary so that you keep it out of touch immediately and from the beginning of the month.
An extra Yajny tip: Think of categorizing your savings to have a clear plan for your money. For example, you can dedicate some of your savings to your retirement plans, because it is never to early to start planning for your future. Or if you are planning to go on vacation, start deciding on a budget for that too, so you don’t dip blindly into your savings.
Step 6: Invest
Last but not least, is a step we all think about but not always have the courage to take, investing. Investing some of your own savings into your own business or into some other trusted businesses could be extremely rewarded if done right. And since you now have a stable financial situation with a clear cut budget for saving and spending, it is the perfect time to invest some of those saving into something on the side to give you extra income.
This whole saving plan could seem a little complex at first, however, once you start and get the wheels running, you will realize that it is actually quite easy to do and that there is nothing better you could do for your future self.