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In the current world where you never know what is going to happen, saving money is more important than ever, but the problem of not being able to do so is very common. And I am no exception to this. I used to think “Only if my income goes up, I could save more money.”
Theoretically, if you make more money, you should be able to save more money, right? But is it true? Can you really save more if you make more? As for me, my income increased every year, but my savings didn’t increase at all. In fact, I even saved more often when my income was low. Why was this happening to me?
It is because of lifestyle inflation. I had a bad habit of spending money where there was money. So when I had more money, I spent more.
I have learned that the more money you handle and the more categories you spend it in, the more wisely you have to deal with it. Desire may be infinite, but money is finite. Without being careful, it is possible to have an income of $100,000 and have $0 in savings. On the other hand, by being wise with money, it is possible to earn $40,000 and still have $100,000 in savings.
Having a high or low income does not necessarily equate to being able to save. There are many factors that make difference between being able to save and not being able to save. Today, I would like to focus on 3 big factors that make the difference between being able to save and not being able to save.
putting aside money for savings the moment you get paid
Is saving in your budget or do you save if you have extra money before payday?
When I was saving more regularly, I was doing the former. However, as my expenses gradually increased, my thinking shifted more toward the latter, and eventually, I was unable to save at all.
THERE WILL BE NO SURPLUS MONEY AT THE END OF THE MONTH!
A lot of people including me tend to spend more if they have more money: brand new products over used products, a bigger house over a moderate house, and a luxury hotel over an economy hotel.
What happens is that they start paying for what we want without considering too much about it because they have enough money.
Lifestyle inflation is OK if you manage it well, but it will accelerate more and more without you noticing if you are not careful.
Instead of hoping there will be extra money to save at the end of the month, saving money first upon getting paid is a lot easier and more reliable. Once you have put aside money for saving first, all you have to do is live with the remaining money. This is the method I came back to when I couldn’t save at all, and it has become the basis of my approach to saving money.
I suggest having a separate account for saving money. That way, you can see how much you’ve saved.
It will be all right! We are creative to live with what we already have.
Managing the budget well
It may just come down to this. Even if you save money first when you get paid, if you have to touch it because you’ve spent all of the remaining money and now need more, it is the same as you didn’t save at all. Also, it is easy to spend money with credit cards and other cashless means even when you don’t have money on hand. However, this means you are borrowing money from your future self.
So, it is also important to decide what and how much to spend and to stick to it.
When you come across something you want to buy, you could ask yourself. “Do I really need it? Will I still buy it if it was $50 more?” “Will I still want it if I come back next week?”
Do you need that subscription? How often do you use it in a month?
Do you go out for drinks every weekend? Your friends wouldn’t or shouldn’t forget about you even if you skip a few times.
Try to cook at home as much as you can. One less eating out could save you about $20 per person!
My lifelong challenge is to be able to identify and spend money on the things that add value to my life.
Having financial goals or dreams
Do you have a financial goal or dream? For example, setting up an emergency fund, buying a house, taking classes for skill advancement, having abundant retirement money, and so on. When do you want to achieve this goal or dream? If you know what and when to achieve your goal or dream, you know how much money you need to save every month.
My husband and I always have financial goals from small things like buying a new smartphone to big things to buying our forever home. Whenever we set a new goal, we budget for it. We try not to spend money on anything unless we know we can afford it.
I believe having financial goals and dreams makes the present inconvenience tolerable. And you will feel a great sense of accomplishment when your goals and dreams come true.
Wealth is what you accumulate, not what you spend.
This is my favorite quote from my favorite book, The Millionaire Next Door by Thomas J. Stanley, Ph.D., and William D. Danko, Ph.D.
Let’s start with what we can do now to prepare for what may happen in the future.
What do you think makes the difference between being able to save and not being able to save money?
What is your tip to save money regularly?
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