Challenge Your Saving Mindset
posted in General Finance |If you’re like the most people, the thought of saving money conjures up thoughts of endless budgeting that denies you from enjoying the fruits of your labor now. What if we asked you to challenge your perceptions about saving?
Let’s dissect some of the most popular theories many people have about saving.
Are you one of the “I could be dead tomorrow so spend today” group? While we don’t have a crystal ball to predict your individual lifespan, we do know people are living longer now. Those golden years last a lot longer now and are not so golden if you’ve got nothing to live on. Not to mention the reality of inflation, which can really wreck havoc with what you’re left with.
OK, you say, maybe you won’t be dead tomorrow, but you need every cent you’re making to live your life right now so how can you think about saving for the future? And besides, the amount you can spare is so small it can’t possibly amount to anything, can it?
Actually, you’d be surprised what saving small amounts can amount to over a period of time.
Well, in that case, you’re probably thinking, I have plenty of time to start saving and right now this isn’t a good time. Again, we must disagree strongly. The sooner the better is always the motto when it comes to saving. A good time to start saving is never later. First of all, you can be sure that something is always going to come up that can prevent you from setting aside money. This is why we advocate the tried and true method of “paying yourself” first.
How do you decide what amount you can set aside to pay yourself? While initially somewhat cumbersome, the best way to do it is to keep track of all your expenses for two months. Include fixed, usual and out-of-ordinary expenses. If subtracting the expenses from your income leaves you with a positive balance, earmark that amount at minimum for savings. If you are not left with anything after subtracting expenses from income, see if you can trim something from your discretionary expenses and designate that amount for savings.
So first, you need to identify your opportunities for saving. Obviously, surplus money after expenses is a prime candidate. But changes to your discretionary spending may provide additional savings as well.
Second, the longer you wait to start saving, the more it will cost you in a big, big way. A dollar saved today will be worth a lot more in 20 years than a dollar saved a few years down the road.
There’s no time like the present to get going on setting something aside. Remember, no matter how small the amount you can set aside, the sooner you start, the more you can make with that smaller amount due to the marvel of compounding interest. Also, if you’re fortunate enough to have some type of employer-matching retirement plan, you’ll have even more to show for your savings.
Look at investing and saving as an exciting means of getting the most out of what you earn so that you can accomplish what you want. Whatever spending money you deny yourself won’t be so much, and think of what you can achieve by making the most of the investment vehicles right for you. Whether it’s a savings account, a mutual fund, the stock market, insurance, real estate, or your own business, you can use these vehicles to achieve the goals you set.
Did you like this post? Then you might find these also interesting:
