Most of us must have experienced or realized the sense of ease in our lives if our finances are under control and we can all agree that there are many reasons to save.
The best life is to live it on one’s own terms - be it travelling around the world and creating memories, taking a job which is personally satisfying rather than financially benefiting or for that matter pursing personal goals to start your business to contribute to the society.
“Wealth is the ability to fully experience life”- Henry David Thoreau
If you wish to live life stress-free on your own terms, you need to be financially stable. Saving is one of the most important steps which can take you towards your dream life. There is a very popular joke: “If you hate your job, take a loan and the commitments of your loan repayments will make you start loving your job”. This is indeed a fact as most of us will be afraid to take a personally satisfying decision because of fixed monthly financial commitments.
The more you are financially stretched the dream of living an independent life takes a back seat. Your financial commitments will force you to be stuck in one place where you might not be happy.
A disciplined savings habit can be a very successful solution to achieve your dream of a quality life.
Saving is an essential habit which must be developed as early as possible, and one must be regular. Just like exercise is required regularly only then one can experience its benefits to a healthy life similarly saving money is not a onetime affair. It must be made a habit to reap its fruits in long term.
“If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffett.
Many people get the wrong idea that saving is cutting down on one’s essential expenses, but right way of savings would be to cut down or reduce your unnecessary expenses. These savings must be invested wisely to create wealth.
Wealthy people have created wealth which is making money for them. They have a great habit of saving money by controlling their expenses to grow and generate wealth.
Here are Top 5 ways which I think are great way to cut down on unnecessary expenses, save money and start accumulating wealth.
1) Follow and practice a 15-day rule:
Most of our unwanted purchases are because of our impulse which we are unable to control during a particular moment. If you see a thing that you wish to buy, wait for 15 days before buying it. After 15 days, if you still wish to buy the item, move ahead with the purchase. If you forget about it or realize that you don’t need it, you will end up saving that expense.
2) Get rid of excessive prestige
If you want to be successful in saving, you should lose your excessive prestige because it is certainly useless. This prestige sometimes makes your finances fall. One expensive wrong purchase will suddenly land you in the strained financial situation which can continue for years. Those of you who previously wanted to save will be forced to cancel this desire just because you wanted to join your friends to become a fashionable person.
Another example can be while hanging out. You don’t always have to hang out at expensive cafes if there is an option for a cheaper cafe, the menu is varied and delicious and there will be no compromise on the fun. What matters is that the same level of enjoyment can be experienced, your stomach can be full, and you can gather friends while saving regularly from going to expensive cafes.
“Stop buying things you don’t need, to impress people you don’t even like.” — Suze Orman
3) Wisely take advantage of discounts (especially the ones available on credit cards and on online shopping).
In addition to items on sale, some items sold in malls or on online shopping are often discounted. Take advantage of this discount to reduce the amount of money out, yes! Do not hesitate to use an e-wallet or credit card when transacting if there are rewards like cash backs.
For credit cards always pay the fully due amount as the interest rates are too high on the unsettled or partly settled bill. You should always follow a practice of setting aside money to pay the credit card bill after shopping so that you don’t need to make a special allocation of money when the bill is due.
“Never spend your money before you have it.” — Thomas Jefferson
4) Set savings goals and treat yourself when achieved
One of the best ways to save money is to set a goal. You can set goals for all important milestones of life like getting married, taking a vacation in a foreign country, or saving for a retirement. Once the goal is set start saving. This step sounds easy, but it is the most difficult one and bound to give you surprises. But this will also make you realise the financial discipline that is required in life. A particular saving goal can be more difficulty to achieve it then you might think it is.
Have a small, achievable goal for something fun. Small goals can be new smart phones, staycations, etc. Enjoying the smaller goals when achieved can give you the psychological boost and encourages you to save more. Be sure to remember long term savings goals and its important that retirement planning doesn’t take a back seat to shorter term needs.
5) Make Saving automatic
Keep a separate account for your savings. The idea is to save first and spend whatever is left after saving. You can choose when, how much and where to transfer money or even split your direct deposit so a portion of every paycheck goes directly into your savings account.
Saving immediately at the time of paycheck is a great saving practice as you don’t have to think about it and results in reduced temptation of spending the money.
“It is never too early or late to encourage long-term savings.” — Ron Lewis
[The author is a Muscat-based finance and accounting professional. Email: sethiajatan@gmail.com]
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