Yesterday, we talked about habits that all financially healthy people have (we salute you all). Chief among those skills is one we’d like to talk about a little bit more today and that’s saving.
Why should you save at all? To secure your potential future needs with the certainty of your present income. We specifically mentioned that you should be saving at least 30% of your income every month. You might be wondering as to how one arrives at that number.
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 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’s 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 prioritize 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?
That’s exactly what we’ll be talking about tomorrow.