What is saving money?
Saving money is what I call reduce expenditures and recurring costs. Such as that pricey cup of coffee every morning on the way to work. Or remodeling projects around the house like decorating the home.
See also: Decorate on a budget
What is saving money and how to save money?
In terms of personal finance, saving generally specifies low-risk preservation of money. As in a deposit account, versus investment. wherein risk is a lot higher. Meanwhile, in economics more broadly, saving refers to any income not in use for immediate consumption.
What is saving money: Why is saving money important?
We save money to be financially secure. And prepare in case of an emergency because we cannot predict the future.
Not saving money opens us up to other risks as well. Such as being forced to take a loan for an emergency dental procedure. Because saving money should otherwise cover this emergency expense.
What is saving money: The importance of saving money
unplanned expenses that come up like a new roof for the house or a decorating project. Out-of-pocket medical expenses and even sudden loss of income. In my case therefore, domestic abuse including financial control. Consequently, We need money set aside for these emergencies to avoid going into debt to pay for them. And worst yet, being homeless.
We need savings and/or investments to take the place of income upon retirement. This is assuming that we trade time for money. Because investors and entrepreneurs never retire. As they always have multiple streams of steady income coming in from their investments.
Average Life Expectancy
With more advances in medicine and public health, we now live longer. Therefore, we need more money to get by and survive.
Volatility of Social Security
Treat Social Security as a supplement to income only and not a primary source of income. Because it was never intended to be the primary source of income.
The cost of private and public education continues to rise every year. Consequently, makes it tough to meet the demands of education.
I have 96 college credits floating in the air. Because I cannot afford to finish my bachelor’s degree. Besides, I am not a US citizen. And not eligible for scholarships or grants even as an academic braniac. I am therefore not worthy of scholarship rewards for big brains. Just because I am from a different country.
What is the 50/20/30 budget rule
Senator Elizabeth Warren popularizes the 50/20/30 budget rule in her book “All Your Worth: The Ultimate Lifetime Money Plan.” Therefore the basic rule is to divide after-tax income. Spend 50% on needs and 30% on wants while allocating 20% to savings.
Needs are bills that you absolutely must pay and are the things necessary for survival. These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment and utilities. The “needs” category does not include items that are extras, such as HBO, Netflix, Starbucks and dining out.
Wants are all the things you spend money on that are not absolutely essential. This includes dinner and movies out, that new handbag and tickets to sporting events. Also add vacations, the latest electronics gadget and ultra-high-speed Internet to this list.
This category also includes those upgrade decisions you make. Such as choosing a costlier steak instead of a less expensive hamburger, buying a Mercedes instead of a more economical Honda. Or choosing between watching television using an antenna for free and spending money to watch cable TV. Basically, wants are all those little extras you spend money on that make life more enjoyable and entertaining.
Allocate 20% of your income to savings and investments. This includes adding money to an emergency fund in a bank savings account. Making IRA contributions to a mutual fund account and investing in the stock market.
What is the 30 day savings rule
The 30 day money savings rule is an easy way to save capitalizing on our shopping habits. More specifically impulse purchases.
Instead of making an unplanned impulse purchase, shelf that potential purchase for 30 days. Meanwhile, deposit the money into your savings account instead. If you still want to buy that item after 30 days, go for it. Otherwise, the money stays in your savings account. This, in turn, will help you boost your savings over time.
The 30 day savings rule is closely related to the 30 day impulse spending rule.
30 day impulse spending rule
Impulse spending is when you spend money based on your emotions rather than what’s in your budget.
Purchases on impulse throw your budget off track. And therefore cause you to accumulate more debt if you spend too much. Here’s where the 30 day impulse spending rule comes in handy.
To avoid an impulse purchase, think about it for 30 days. Take a piece of paper and write down the name of the item, service, etc. As well as where to find it, and how much it costs. Put this note on the fridge or somewhere prominent at home. Consider the purchase for the next 30 days and decide if it’s a true need or want.
If you still want to buy it at the end of 30 days, go ahead and purchase it. If you forget about the item or realize it really isn’t that important, you save that money.
While contemplating an impulse purchase for a 30 day period, put the money in your savings account. This is money that serves to purchase the item only.
To purchase the item simply take the money out of the savings account to do so. But, that money will come out of your savings account – meaning it will no longer be there to use toward another savings goal.
This rule provides an easy opportunity to save consistently and enjoy the benefits of saving money. It also motivates you to increase your savings.
Why? Because when you work hard to set aside some money, it is difficult to touch it for a purchase that isn’t a true necessity.
Consider all your other savings and financial goals. Money set aside over 30 days provides a sense of security to cover future emergencies. And eventually pay for that summer vacation.
What tips do you use to save money?