Saving money is the first step to real financial independence and success. The problem is that so many people don’t have the knowledge of how to start saving and the best places to do it.
There are so many places to keep your money and without education, most people leave their money in their 1% interest bank accounts and make no progress!
The first step in saving money is understanding your why. What are you working towards? Are you saving money for a downpayment on your dream home? Are you saving money just to have a surplus for peace of mind?
Whatever your why, saving is a great idea and a great place to start. Saving money is going to put you in a better financial place no matter where you do it.
If you’re really wanting to start saving money, I suggest you pin this post for later and keeping it as a reference to help you!
WHEN TO START SAVING MONEY
Obviously, the easy answer here is to start now. Like actually, stop reading this and start saving. Just kidding, please finish reading this.
You should start saving as soon as possible if you have goals. However, if you have high amounts of debt I honestly suggest paying that stuff off before you start throwing all your money at other options.
Start saving as soon as possible!
THINGS TO SAVE FOR
I don’t know how many times I’ve stressed the importance of an emergency fund, but it isn’t going to end here! An emergency fund is the single most important thing you can have in your financial setup.
So, what is an emergency fund?
An emergency fund is a specific bank account that’s used at any time where you need money quickly for something that you could not have planned for. It could be used when you lose a job, when you end up in a hospital, or when your roof caves in from a crazy storm that your insurance won’t cover.
A fully funded emergency fund will contain 3-6 months of your household expenses to cover just about anything that can be thrown at you.
I’m so passionate about the importance of emergency funds, that I wrote an entire post on how to start a $1000 starter emergency fund.
The sad fact is that most of the population makes the horrible mistake of charging their vacations to their credit cards. A vacation that could’ve cost them $2,000 ends up costing almost 50% more by the time they’re paid off.
The crazy thing is people plan vacations usually at least a year in advance but they still just charge it.
If you planned to save all of the money for a year and got laser focused you could have the entire trip paid for before it even begins! No more charging vacations!
The world is experiencing a crazy student loan situation that’s never been seen before. 18-year-olds are being trusted with the decision to go into thousands of dollars of debt without even being taught about how it really works!
The fun thing is, it’s 100% possible to pay for school without the mistake of taking out student loans!
If you plan to go back to school or have children who you plan to pay for college for, you should start saving as soon as possible! Graduating debt free is totally possible, you should check out our post with tips to help you graduate debt free!
If you have it in your five-year plan that you want to purchase a new home or a new car, you should start saving up for it well in advance so you aren’t scrambling to make the payment when you find your dream home.
A huge issue with us young people (wow, am I 23 or 93?) is that we put off saving for retirement until we’re well into our 30s. We really need to start retirement savings earlier! Compound interest baby!
Anyway, having retirement savings is so important for your future because we all know that we can’t completely rely on pension programs for our futures.
WAYS TO START SAVING
1. Pay Yourself First
The reason that so many people fail to save money is that they pay everybody else before they pay themselves. Have you ever been in a position where you pay all of your bills, go shopping, and then you think “oh, I should save some money!” but there’s nothing left?
Every single day we pay everybody else before we pay ourselves. If you start paying yourself first and putting 10% off the top of your paycheck into savings you won’t really miss the money.
Let’s go into an example of doing this. Let’s say you’re making a monthly salary of $4,000. You take 10% of your weekly $1000 and throw it right into a savings account for your emergency fund. This means you still have $900 a week or $3,600 a month to play with and you can easily live off that much money. This means you’ll have a savings account with $5,200 in the account by the end of the year and that’s crazy progress without even trying.
2. Start Using the 50/30/20 Budgeting Principle
Under the 50/30/20 budget, you put 50% of your money toward your essential expenses (food, housing, transportation, etc), you put 30% toward your personal choices (eating out, phone bills, entertainment), and 20% toward your financial priorities (debt, saving, investing).
If you start using the 50/30/20 method, you’ll still be able to do everything you want while still putting 20% of your money toward things you need to do like saving and paying down debt!
If you’re making $1,000 a week after taxes, you’d put $500 toward your essential expenses, $300 toward a phone bill, entertainment, clothing, etc, and then you’d have $200 to pay down your debt or start saving! It’s a great place to start if you just want rough numbers and more freedom.