At the start of every year, we usually make promises to ourselves to be better or do better at various aspects of our lives.
These New Year’s resolutions may involve taking our personal relationships to the next level, pivoting our career paths or leading healthier or more active lifestyles.
Often, we also resolve to be better with our finances, especially when it comes to our savings.
What are savings?
Savings comprise the money that we have left after we subtract our spending (the cost of the goods and services we purchase) from our disposable income (i.e. what is left of our income after taxes).
This can be set aside for planned major expenditures in the future such as school tuition, home or car purchase, vacation or even retirement.
Why is it important to save money?
Having ready cash to spend on the things we want (such as the wedding of our dreams or a grand graduation gift to our child) and need (such as home or car repairs) is always great for our peace of mind. Going into debt for these major items, or even for small expenses, not just adds to our stress but may also derail our financial standing in the future.
Also, in case of unforeseen circumstances such as medical emergencies, having some funds set aside that we can dip into so we won’t go into heavy debt is such a relief, isn’t it?
Hence, we have an urgent need to save money.
How to save money
We already know that saving money for our future is essential: the problem is how to go about doing it.
After all, with the rising costs of living, the near-constant stream of messages in the media to always consume, consume and consume some more, plus the emotional high we get when we acquire something, we often finds ourselves reaching for our wallets again and again.
In this kind of environment, saving money is near impossible, isn’t it?
From my experience, this can be achieved by creating opportunities to increase our income and reduce our expenses. This may sound complicated at first, but with a few adjustments in how we view and treat our money, we can soon come up with a sizable pot for our savings.
Ways to increase your income
Saving up requires you to have earnings from which you will draw your savings. Earning more money, therefore, gives you a bigger room to spend (or save) money.
- Pursue a job promotion. If you’ve been with your current employer for quite some time, you excel at what you do and are open to taking on additional responsibilities and work challenges, going for a promotion (and the pay increase and perks it brings) is one way to significantly grow your earnings.
- Start a side hustle. If a promotion at your current job is a long shot, you can supplement your earnings by making money out of your talents and skills that provide value. In my case, I accept content creation assignments and writing jobs for food businesses. This way, I get to sharpen my skills as a content creator which also benefits my existing job as a marketing professional, while making some money on the side.
- Create a passive income source. You will be surprised at the ways you can make some money with little to no effort. These include property rentals, royalties from published works and sales of online products. For example, I have enabled ads on my blog and while its earnings are still minuscule at its early stages, it still adds to my earnings with no additional work required from me.
Ways to reduce your expenses
Increasing your income will be for nought if your expenses are increasing at the same rate, or worse, at a faster rate than your earnings. Cutting down on your spending will greatly increase the funds that you can set aside for savings:
- Trim down your monthly bills. You hardly notice them but those monthly recurring expenses do add up. Prune off the monthly subscriptions that you no longer need or can easily replace. For example, you can limit yourself to maintaining just one video streaming subscription instead of five, or give up your gym membership and just learn yoga by watching free videos on Youtube. You should also check if you have a house leak that shoots up your water bill or set a timer for your heating or air-conditioning system to manage your electricity usage.
- Prioritize your “treats.” Sure, you may feel like indulging yourself to a daily cup of handcrafted beverage at your favorite cafe, or getting a bi-weekly spa treatment but those little expenses do add up. Limit the frequency of your self-indulgences; not only will you save money in the long run, but the anticipation for the treats will make experiencing them even more special.
- Shop smarter. If you’re used to winging it at the grocery or department store, it may be time to start shopping with a list. The exercise of making a shopping list involves assessing the things you have versus the things you need, minimizing overlaps or wastage.
Begin with the end in mind
By taking these tips to heart, you can find yourself accumulating savings in due time.
To really get you in the mood to save money throughout the year, it’s best to set a goal. It may be for something to reward yourself with – such as a trip you’ve been dreaming of taking or a new car – or something for your future – such as capital for your future business.
At SavingsCalculator.org, you can set the goal amount for your savings, the amount of money you currently have set aside, the interest rate and how much time you intend to save money for. The site’s calculator will then show the future value of your existing savings and how much you need to set aside each month to reach your goal.
Other calculators in the site can help you calculate:
- the value of certificate of deposit investment versus a regular savings account
- the money you need to set aside for your child’s college education
- how much money you need to save to have a substantial nest egg upon retirement where you can withdraw a specific amount each month
- what compound interest brings to your savings
Saving money may not get us that instant high we get from spending it, but it does set us up for a more comfortable future.
So stick to your New Year’s resolution to save money. Your future self will thank you for it!