When you work hard for your weekly wage or monthly paycheque, the last thing you want to do is put all that money away just in case of a rainy day. Also, it is much easier and more enjoyable to spend your cash on whatever you want, living every day like it’s your last.
However, there comes a time when you must think about your future. After all, you never know when the world may enter another financial crisis, which could be sooner rather than later if the current gloomy global outlook continues.
So, here are 5 tips from leading financial trading firm IG on how to successfully save for your future.
1. Understand your cash flow
First and foremost, it is imperative you understand your household cash flow, as this can often have the biggest impact on your financial future. Do so on a weekly basis because you will find it easier to catch-up on any overspending and it takes far less time than a monthly review.
Try to be as honest and realistic about your household spending as possible. Give yourself some attainable targets too. There is little point in simply saying you will save, you actually have to go through with it.
2. Establish clear lines of communication
If you are married or have a family, communication is crucial when it comes to saving for the future. It also helps if everybody is singing from the same hymn sheet in terms of long-term financial objectives.
When you sit down and discuss your saving intentions, recognise the difference between what you want and what you need. Learn to say no when something stands in the way or doesn’t align with your monetary plan of action.
3. Put a limit on your monthly outgoings
According to Eric Kies and his First Step Cash Management system, you can help reduce monthly spending by looking at your outgoings as Money Past, Money Present, and Money Future.
Things like mortgage payments and utility bills are Money Past. However, once you add expenses to this category, such as a new car on finance, you limit your day-to-day spending (Money Present) and hamper your ability to save with the long term in mind (Money Future).
4. Automate your savings
Don’t wait until you are about to get paid and simply save what is left, as it will probably be a paltry amount. Instead, put money away when you first get paid with an automatic transfer into your savings account.
In fact, you might want to set up multiple savings accounts if you have a number of different goals. That way, you can see the progress you are making and will be less likely to withdraw on a whim and scupper your long term progress.
5. Allow yourself a bit of leeway
Some people find the concept of saving rather boring and tedious. But if you allow yourself a bit of leeway and put away some funds for spontaneous spending, you can still live life to the fullest.
This might sound contradictory, but if you know you have got money that is strictly for unconstrained enjoyment, you can keep your actual savings safe and sound. The secret to this is, in essence, having the right mindset.