How to Start Saving Money
Due to current events, a lot of people have experienced a decrease in their income and have found themselves without any savings. Something that I have always been good at and enjoyed doing is saving money. It’s a topic I could talk about for hours; how to save it, how to spend it, the value of it, etc. At this moment in time, I’m grateful for my love for money and my knowledge when it comes to saving it.
I am not an expert in any way when it comes to this topic; I do not work in a bank, I did not study finance or economics, this is purely from what I have learned from my parents, my love for money, experience and investment professionals. I hope the following tips can somewhat help you if you’re looking at starting to save or would like to save more than you already are.
Make a Designated Savings Account
Create an account or dedicate an account of yours for something you’re trying to save up for like a car, a vacation, a new home/condo/apartment, a business (like I did), school, anything at all that you need to save your money for in order to buy. Personally, I dedicated an account specifically for my vacations and it’s made me feel better about it because when it comes to spending the money, I don’t feel any hesitation or stress because I know I saved this amount of money specifically for travelling!
Get a Credit Card with Rewards or Cash-back
This is something I always talk about! Sure you may already have a credit card, but are you using it? Does it have any rewards or cash back? One of my biggest pet peeves is when I find out someone only uses their debit card and they aren’t using their credit card to purchase things. You might say that it doesn’t give you a lot back or it’s not worth it but trust me, it’s worth it! I literally only use my credit card to buy things. The only time I use my debit card is when the store/restaurant does not accept credit. I let my rewards/points accumulate for quite some time, but it covered half my flight home from Barcelona (~$350 savings). Using a debit card or cash does not give you anything in return, whereas a credit card can give you cash back or travel points, movie tickets etc. You’re getting something for nothing when it comes to using your credit card. You’re spending the money anyways, why don’t you put it on your credit card and accumulate points? Even if you pay your credit card off right away it’s completely alright because you’ll still be getting the rewards in the end. Thank me later!
Invest Your Money
One of the best things you can do with your money is invest it into something. This could be mutual funds, stocks, real estate, start-up businesses, etc. A lot of people think they need a lot of money to start investing, but that’s not true. You can start with a small amount of money or you can do weekly, bi-weekly or monthly amounts. A mutual fund is a portfolio of multiple companies whereas investing in stocks means investing into one single company. The pro of having mutual funds is that your money is invested in multiple companies (let’s say 5 companies for an example), so if one company in the portfolio of five is not doing well, there is still the chance of the other four companies succeeding. If you invest in one single company (a stock) and that company does not do well, you’re creating a higher risk for yourself. Unless you have a lot of time to analyze and study the stock market, it’s usually a lot more risky than mutual funds. Stock investments are usually a fast purchase and a fast sell, you buy when it’s low, sell when the stock is high. Mutual funds are a good way to invest/save long term.
The Classic 10%
A lot of people know about this savings method; you put away ten percent of your monthly income into a savings account. This is the easiest and in my opinion, the minimum you should be putting away if you want to have a decent savings account. If you make $200/month, put $20/month into your savings; this could allow you to save $240/year. If you make $2,000/month, you should put $200/month into your savings account; this could allow you to save $2400/year. This savings concept is the easiest way for you to start saving! Since it’s only 10% of your monthly income, it’s pretty much unnoticeable. If you are going to use the classic 10% method, you should set this up automatically with your bank every month so you don’t need to think about it and you’ll stay consistent with your savings!
My last piece of advice is to have multiple sources of income. Come up with a side hustle! Start a small business, start babysitting, there’s so many ways to make some extra cash! If you do have a side income, use that money to start your travel fund, car fund or investments! Don’t be afraid or discouraged, $5/month into your savings is better than $0/month.