Many of us are not in a fairytale where money constantly flows like water. But still, more than 50% of the people all over the world don’t save money on the side, let alone creating an emergency fund for themselves.
Hopefully, we all have a long life in front of us. So we need to start saving money, create a monthly budget and track our expenses, and maybe start investing a little.
Let’s not make this a big of a deal and start this money-saving habit right away. If you want to save money effectively and on a regular basis, you should set a short-term goal first. You can even set this goal with your family or your significant other. Saving money sounds a little boring, we are all aware of that. But the solution is not living from paycheck to paycheck. Do the boring habits to secure your next months and years.
The whole point of money-saving is to live a happier and more secure life. Don’t turn this into a nightmare for you or anyone else.
Let me show you practical ways to save money in both short time and a long time.
Best Way to Save Money
- Track your monthly expenses.
Yes, it is the first step of saving money. You need to know the amount of money you spend on groceries, social events, clothes, commuting and even gifts. And what you need to do is to check whether you spend more than you earn or less. As you see, there are two ways to do this. You need to cut down your expenses if you spend more to save money on the side or create an emergency fund. If you spend less than you earn, keep going as amazing as you are.
- Create a Budget
Why do we need a budget? Everyone has a different life and conditions, therefore has their own way to save money. You can spend $500 on food and $1000 social events, but someone else rarely spends on social stuff and spends $1000 on food. It is thoroughly personal. So you need to do it on your own or with your family. Please do not use a ready budgeting system someone else made. We have tracked the expenses first. You can sort your budget based on your paycheck and expenses. You don’t need to do this budgeting every month. They say fake it until you make it, you do this until you get used to the budgeting system, then stop following all the rules. It is not a test, it is your life.
Some suggest the 50/20/30 rule. 50 represents your income. You should spend only on your essentials such as mortgage, rent, bills and food. 30 is for all your other expenses. You can spend %30 of your income on anything you want, but %20 of your income should go directly to your savings account.
- Pay to Yourself First
This is the essential rule for me. As soon as I get my paycheck, a specific amount goes to my savings account. The goal of this rule is obviously not to spend this money. So you’d better put it in a deposit account where you cannot take the money whenever you want. Or you can buy gold in grams. All savings options are ok as long as you put a specific percentage of your paycheck aside. This can be your emergency fund or something bigger in time. Believe me, this habit will make you live better. For this rule or habit (whatever you name it), not the amount of money you save, but the consistency will make you feel happier. So don’t be discouraged if you can only save a small amount. It is still better than nothing. And you know it!
Of course, not every month you can do this. If you are in a big debt, this paying to yourself thing is easily avoidable because you know that you cannot make it to the end of the month.
- Try to Avoid Debt
Debt is the most challenging thing if you are trying to save some money. If you are already in debt, you can create a budget based on your income. While creating a budget, there are two things you can do. First, you can prioritize debt and try to close your debt as soon as possible. Secondly, you can continue to pay your debt regularly but on the other hand you can also save money. If you can do the second one, the savings amount will also be a way to close your debt permanently at a time.
If you ask me, I’m doing the second one mostly. I pay my loan every month, but I also try to save some from my paycheck. In some months, I hardly make both ends meet so I feel happy enough when I pay my loan. Creating a budget, having a small or big debt are really personal stuff. In my opinion, you should read and learn, that is ok, but you have to create and sort (or whatever you need) your budget on your own based on your own needs.
- Start an Emergency Fund
What is an emergency fund? Well, obviously it is not an entertainment expense. It is some money you set aside for emergencies such as health, an unexpected debt or losing your job. Let’s say you lost your job or had a bad accident that prevented you from working. What will you do then? Emergency money will save you when you don’t have the power to keep your life as it is.
This is the same as paying yourself, you just have to put some of your money into an emergency fund. It can be mixed with your normal savings account or you can make two different savings, one is emergency and one is saving for something that you wish for. And it is really better if you can do this once you get your paycheck. Never underestimate the emergency fund, it will change your life.
Well, these are the basic rules to start saving money. What you can do more is making more money. But that is another lesson for another time.
What is the 50/20/30 rule? And how to apply it?
Well, according to the 50/20/30 rule, 50% of your net income represents your must-haves such as rent, bills, food etc. 20% of your income should directly go to your savings account and the remaining 30% of your income is anything else you want such as entertainment, social events or that pullover or electronic stuff you want for a long time.
What are the best tips to save enough money for your dreams?
Saving money is a very personal thing and it can change based on your needs. So what you should do is to create a budget first, and then pay yourself first whenever you get your paycheck.
How to start saving money?
The best way to start saving is to have a goal. This goal can be an emergency fund, saving to buy the car you want or moving into another house. This goal can be anything as long as you believe that you can make this goal happen by starting saving.
How to save money while you are in debt?
There are two ways to make this happen: First, you will close your debt as soon as you can, and then start saving. Secondly, you will pay your debt regularly, but start saving by setting a small amount aside.
What is an emergency fund? What is it used for?
It is the stash of money you can save to cover any surprise that you can come across in life. It can be a job loss, medical emergencies, rent or bills, car problems etc.
What is the simplest way to create an emergency fund?
First, you need to decide how much money will be enough for your emergency fund. For example, it can be your expenses for 3-4 month if you lose a job. Then simply set a specific amount of your income aside for your emergency needs.