 |
| freedigitalphotos.net |
Most people, who are not investing on stocks or bonds, argue that their salary is too low to save. I barely survive, is what I often hear. At the same time, they are still living in a comfortable home, driving a car, they have Sat TV, new computer, new phone, food in their fridge and they enjoy occasional restaurant dinners. Why it is such a bad argument?
It is understandable that people are not willing to sacrifice any of their good earned living standards just to be investing in stocks. Still, I believe that everybody with a regular job can do it. I could do it even with student benefits only.
Increasing your savings rate
I am not going to repeat the same old rules which can be found in every money saving related blog, like quit smoking, stop buying expensive things and so on. I want to challenge my readers on the mental side on saving money.
Here are my few tips for monthly financial stability:
1. Always pay yourself first
When you get your salary, first you probably pay your bills, like rent, utilities and so on. This is good, since you do not want to get behind your bills. What I mean by paying yourself first is that make your savings seem like a bill you pay each month. You should try to save at least 5% on your monthly income in this manner, more you can, better off you will be. When the money is not on your regular account, you consider it "spent", and you will automatically adjust rest of your purchases to the amount you have left.
2. Try to avoid financing household goods with loans
This is a basic one which get repeated over and over again, but there is a catch: If you aim to buy everything on money, you already have, you are most likely taking some serious considerations on what kind of appliance or other good you will be buying. For example, if you need a new washer, most likely you will spend the minimum amount of money you can, to get a working new machine, if you buy it with cash. If you buy it with credit, and think about paying it off in next two years, 10, 20 or 50 euros/dollars a month does not feel as big expense. You will spend more if you have not earned the money yet!
If you need loan, try to find the cheapest deal. Never buy any appliance or gadget with installments longer than 6 months.
3. Private label goodness
Think how much you spend, for example, on pasta. A good brand pasta costs here around 2.50 per bag. Check out the private labels, what are the differences? I usually buy whole grain brown pasta, and actually, the cheapest private label brand has larger percentage of whole grain than major commercial brands. What is the price? 0.69!
4. Credit card devil
Credit cards suck out your wealth like nothing else. They are way too easy to tap and problem is same as with appliances bought over time. When you get used to paying few hundred bucks of credit card debt each month, it becomes stable situation. When you are getting closer to paying it off, you already have ten other purchases in mind. And you will be reminding yourself that I could pay it off earlier. Problem is, that you loose valuable cash on interest you could be using to invest.
5. I need it
I need it. That is a strong feeling. Do you really need the item you are planning to buy? Is it somehow life saving? Could you live without it? If you could, then you probably wouldn't need it in first place. Try to avoid purchases which are justified by feeling of "need". Instead, try to look for actual needs.
Even if you really need something, do you need it instantly? Could you wait few weeks or months to get it? Postponing consumption is usually easy way to save money and avoid debt.
6. Spread out your consumption
This is not a real problem for me, because I do not even enjoy shopping. But if you do, try to avoid huge Saturday shopping fests, when you buy multiple goods at once. Buy only one or few things at once. That way, you can spread out your good feeling of getting something new for less money spent. If you need new jeans and jacket, do you really need both of them at once? Why not spread the purchases over two weekends. Of course, you have to take account on how much you'll be spending on getting to the store in first place.
7. Transportation
Most people do not even count how much they spend on their transportation. If you are a driver, like I am, you probably drive everywhere. Some people might drive extra half an hour to get to a store which is supposed to be cheaper. Is it really cheaper after the gas you spend?
Start counting your car's gas consumption every time you fill up. Then, pay attention to the trip length meter. Gas is way more expensive in Finland than it is in USA, or many other countries. With all expenses, a short half an hour trip can cost you like 5 euros. If you can combine tasks and do them without needing to drive from place to place, that is money put into your savings.
8. Pay yourself again
At the end of the month, when you are getting close to receiving your next paycheck, last thing you want to do is pay yourself. If you have extra 100 you haven't spent, you probably won't need to spend it in last few days. Put that to your investment plan. In that way, you can actually pay yourself twice a month. First payment you make, makes you mentally cut down your spending. Last payment you make for yourself, is a way to reward of not spending it all during the month. This way, you have the flexibility to save and spend, but still get rewarded for not spending. Mentally, that is really important
No comments:
Post a Comment