4 Basic Steps to Saving

As fresh graduates, having earned money we could call our own and hence the freedom to spend at will, we often tend to overspend or what you would find familiar – indulging yourself after a hard day's work. Yes, we all know the benefits of saving up for a rainy day… but is money ever enough to have extra to stash away as savings, right? Saving is one of those things that are easier said than done. Nonetheless, here are some beginner steps to start saving.

1. First Get rid of your debt

Do some calculations and set aside money monthly to pay off your debts (yes, it's time to pay off that study loan!) over a reasonable period of time – especially for big ticket items. For example, if you are paying the installments for your laptop which costed $2,400 and you wish to pay it all off in a year, put aside $200 every month. The sooner you become debt free, the earlier the same amount of money could be saved or used to pay off new expenses instead.

2. Keep the Records Straight

For at least two weeks, as much as possible, keep records of all your expenses from daily meals, necessities to clothes and monthly installments. Make it a habit to keep receipts in your wallet which you would then offload into a box at home. Then access your expenditure: how much do you make, what do you spend on, what should be spent on, what shouldn't be.

Take 5 minutes to draw a quick pie chart with the broad categories such as rent, insurance, meals, bills and entertainment and give them percentages. Or better, calculate in dollars the percentage equivalent. Then draw your ideal pie chart. Now you'll have a better idea of what you should be spending most and least on, where to cut costs as well as what unnecessary expenses are eating into potential savings.

3. Use your Needs (or Wants) to Motivate Yourself

Big ticket items like planning for your wedding expenses, own house and even a car could be daunting. But not if you start saving for them now. As little as $10 or $50, set attainable goals, plan part of your salary for them (depending on your paycheck, decide what is realistic), set aside money on regular basis (monthly or bi-monthly) and stick to the plan. Slowly but surely you will reach your goals.

On top of setting aside $100 a month for his honeymoon, a friend of mine keeps a transparent bottle – with the words "honeymoon" plastered across – that he drops all the spare coins from his pocket daily. By the end of three years, he and his fiancee had a neat honeymoon at Maldives which he described as "painless and felt like free".

4. Avoid Future Money

Whenever possible, pay for everything with money you have on hand. It is easier to overspend with cheques and especially credit cards whereas you know you have spent too much when you have no more cash in your wallet.

Put your entire paycheck into your savings account. Each week, or every three days, drop by the ATM to withdraw a reasonable amount you will need for that period of time. This way, you will be reminded to spend less when you have spent the allocated budget for that time period or when your wallet becomes thinner. However, if you have to pay by credit cards for a good discount, be sure to keep the receipts.

Sounds simple? They are not as easy as they sound! Try these few steps first, change your lifestyle, and you'll begin to find in yourself a more conscious spender.

You might also like: Financial Planning for Fresh Graduates, Managing Greed and Fear, Dollar Cost Averaging

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