Most of us probably wouldn’t call our own parents financial experts, but looking back it is likely that we wish listened when they used to badger us about saving money instead of spending it at the confectionery store and later, in the local bar.
However, we all come to understand the importance of saving money, whether it’s for the usual ‘rainy day’ scenario, because we’ve started to look towards our retirement, or because we’re looking to save money for a holiday or a big-ticket purchase.
How can you approach personal savings to ensure that you’re achieving your objectives?
Treat it as a Necessary Expense
Some people actually ensure that their savings is the first thing that comes out of their bank account at the beginning or the end of each month.
If you take this approach, then you’re guaranteed to save money without even thinking about it, as you lump it in with your rent, food, and other necessary living expenses that you’ll incur.
This is a great way to ensure you achieve your personal savings aims, rather than doing what most people do and saving what you have left at the end of the month without proactively thinking about it.
While there is value in the latter approach, you tend to find you’re saving an inconsistent amount of money and find it difficult to achieve your goals.
Consider What You Can Cut
If you’re struggling to save a particular amount of money each month, then look at what you’re currently spending and how you can reduce your expenses. Usually, you’ll be able to save a significant sum of money by having one less night out a month, cutting your cable subscription, or finding a similar area where you can reduce expenditure.
Whatever you save, immediately make that what you save. If you take this approach, then you won’t see any difference in your finances, as it is money you’d have otherwise spent elsewhere anyway.
Look at Savings Options
When you’ve started to gather some money, it is time to look at your options when it comes to personal savings. A regular savings account where the interest adds up is often suitable for most people, but you might want to grow your ‘nest egg’ quicker, for example, if you’re only starting to save late in life.
If this is the case, talking to a financial adviser is definitely something you should do. Although you might end up using another savings option, such as a fixed term account with an excellent rate of interest, you could also be introduced to stocks and shares or private equity.
There’s sure to be a financial solution to suit your needs and objectives, and speaking to a professional will help you to discover it.
Remember the reason why you’re saving. It can be tempting to look at what you have in your savings account and want to go on a spending spree, but even if you’re only saving for a rainy day, having additional money in the bank can be hugely liberating.
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Daisy is a finance student who shuns the stereotypical student lifestyle and instead saves all the money she earns from her part time job. She hopes to become a personal finance manager upon completion of her studies.