Saving will never go out of fashion. That’s because there will always be rainy days. You don’t want to be caught off guard in those emergency moments. Also, you want to be able to power those desires you’ve been longing for like finally owning a home or taking your family to that dream holiday destination.
Savings will help you achieve this and more. Besides keeping money aside for future use, there’s also this priceless financial mindset savings will impart to you. Yet, many people, even those who know the benefits of saving, find it difficult to keep money aside.
If you are in that category, don’t fret! Here, we’d show you smart ways to ensure you don’t spend all your income before the blink of an eye. Without these easy yet effective savings hacks, your journey toward a healthy and efficient savings culture isn’t complete.
What Is the 50/30/20 Rule?
If you’ve come across enough books on finance, one question you would have in mind is, “What is the 50/30/20 rule?” This rule is one of the most popular principles of financial freedom, specifically in savings. Yet, many people haven’t had an easy time getting a hang of it. Therefore, we will break it down as simply as possible for you.
The 50/30/20 rule is a popular budgeting method that reserves 20% of your income for savings. The technique entails dividing your take-home pay into three major categories: 50% goes to needs, 30% to wants, and 20% to savings and maybe paying off your debts.
This means that if your monthly income is $5,000, 50%, which amounts to $2,500 will go to your needs. 30%, which is $1,500, will go to wants, and 20%, which is $1,000, will be for savings and debt repayment.
To better understand how to apply this principle, you must understand what falls into needs and wants. Needs are expenses that are crucial for your survival and basic welfare. They include food, housing, healthcare, transportation, and utilities. If 50% of your income can’t meet your needs, then you might consider trimming them down or looking for additional sources of income.
Wants aren’t crucial to your survival. They are just expenses that make you happy and add a boost to your well-being. For example, you may want to eat at a fancy restaurant at least once a week or purchase an expensive piece of furniture or electronics.
Taking 20% of your income to savings will meet your financial goals and stay above debt. Also, it will assist you in achieving a more comfortable retirement.
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Other Savings Hacks
A host of other savings hacks will help you live a disciplined financial life and achieve your goals. One of them is automated savings. This hack takes the savings burden off your hands. It saves you from the temptation of eating into that 20%.
Also, learning how to bargain prices will do your finances a lot of good. Any time spent negotiating your insurance premium or cable costs is time well spent. Stop being in a hurry to pay. Find out if there are better deals elsewhere.
Another area where people squander their hard-earned money is through unscrupulous subscriptions. You might be losing some precious hundreds of dollars to subscriptions you made in the past and are probably not aware of.
So, one effective savings hack to try is scrutinizing your bank statements to see which subscriptions are draining your purse and then slashing them off.
How Much Should I Be Saving Monthly?
As beautiful as the 50/30/20 savings hack is, you are at liberty to decide how much you want to save. Your savings can either go above 20% or below it. It all depends on how much you earn and how much comfort you can deprive yourself of.
However, experts recommend that you shouldn’t save less than 10% of your income. So, a savings percentage of 10-20% or even more is a safe range.
Is Saving Money Worth It?
Absolutely! Just like the name suggests, personal savings can prove life-saving in the event of an emergency. The greatest reason for savings is that it serves as emergency funds. It’s better to plan for tough days than to hope they don’t come. Like it or not, they will.
Savings will also help you achieve milestones with ease, such as having a baby or getting married. Other milestones include seeing yourself through college and having a smooth retirement.
ALSO READ: Naomi Campbell on Being a Mom of Two: “It’s the Biggest Joy”
Where Can I Save Money Without Touching It?
There are many factors to consider when deciding where to save your money. One of them is a return on investment. You don’t just want your money to sit idly somewhere; you also want it to grow. High-yield savings accounts come to the rescue in that area.
However, the greatest need for many savers is how to resist the temptation to dip their hands into their savings. Well, the best way to avoid falling into temptation is by removing the temptation. In this case, a Certificate of Deposit (CD) will serve you better than a savings account.
A CD locks your money up for a specified period and charges a fee for early withdrawals. Another savings hacks is to keep your money in a money market account, which yields more interest and places more withdrawal restrictions than regular savings accounts.
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