5 Rules to Help You Manage Your Money Savings
Why save money ? As one of the safety rules in the Maslow Hierarchy of Needs Theory, money is very important to help you feel more comfortable, to help you feel more secure and hopeful about the future. I will help you deal with your first savings in a very systematic way by providing you with 5 rules that you can follow without changing too much of your life style.
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As you know, money does not grow on trees, does not fall from heaven. Money comes with work, with dedication, with discipline. Unfortunately we need money to satisfy some of the most important things in life. So, if these are the rules, use them to your benefit.
I will try to be very objective in this money savings tips article. After you follow these recommendations, I'm pretty confident that you'll get visible results in the following months.
Rule 1. Create Your First Savings Plan. Think in long term figures. Today, with the help of new technologies, we can create a helpful spreadsheet in excel, or in any open-source math solution, to help us plan our money savings for the future. Use it as your money money savings calculator. In this spreadsheet, you have to include all your income sources and all your expenses. Include everything from the house mortgage, the supermarket bill, etc, and make projections for the future. See how much money you have available each month. This is very important to establish precise savings rules.
Do a five, ten, twenty, thirty year projection and establish objectives for specific years, like buying a house, buying a car... even if you don't know when, just predict. This will help you to contextualize the savings effort through the year. Also include your income predicted increase...or decrease... for each year.
As an example in this article, we will consider a 1500$ money availability each month (after all the expenses deduction).
Rule 2. The 25% rule. This is the most essential rule. Despite your income figures, define that 25% of your available money each month will go to the savings account. This account can be a minor account with low interest rate. The money will be there as a place holder until good application opportunities appear (to apply in Rule 5).
In this article, we will consider a monthly saving of 375$. Now, let's propagate this to 12 months. We will achieve a 4500$ in the first year, 45.000$ in ten years.
This 25% rule is the minimum possible to have good results when starting this savings method. If you can and according to the first results evaluation, raise the monthly rate to 30% or 40% depending on your life style. In my case, me and my wife reached a 40% rate. Recall that the difference in this decision will be reflected in long term numbers. If we save 40% in ten years, we will achieve 72.000$, a big difference by increasing only 15% of monthly savings.
Rule 3. Always Before and Not After
Fundamental rule; when you receive your income, the first bank operation you shall make is to transfer the 375$ to your savings account.The "after" is reserved only for your monthly extra savings effort. In the end of each month, all the money between 0$ and your current bank balance shall be transferred to your savings account. Start each month with zero or a pre-defined value.
Rule 4. Do Constant Checkpoints Through the Year Through the year, you must consult your spreadsheet and make some corrections. Align your savings percentage always in the perspective of increasing the numbers. If it is possible for you to increase the savings monthly percentage, just do it! You will enjoy that decision in the future. It is important for you to visit your savings spreadsheet since it will give you the sense of the savings evolution and it will allow for the constant optimization of the process.
Rule 5. Define Your Bank Applications for the Next Year In the end of each year, or during the year if good opportunities appear, you must select which are the best applications for your money savings. Research about bank products available in your current bank institutions. Only if you find extraordinary products in other banks it is justifiable to change your bank account... the effort, sometimes, does not justify 1% or even 2% of interest rate. Add in your spreadsheet the projections for each year of your interest rates and add them into each year savings predictions, they are an income too.
These kinds of savings methods enable peoples and families to have a money-pillow to hold-on when major problems occur. I hope these rules will help you manage your savings better so that you can feel more secure in the long run, with a sense of having more resources to apply when/if the time comes.
The rules I present to you are not by all means strict. Use them as a basis and then modify them or add new ones on-top of what you think works for you.
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Posted in Business Service Post Date 01/12/2017