Saving money is easier said than done.
Most especially when you’re used to spending money and saving what is left.
The question though, do you still have money left to save?
In most cases, there’s little to no money left after spending your hard-earned money, and once you’re out of cash borrowing money from a friend or using your credit card is your first option.
This kind of practice is doing you more harm than good. Using credit or borrowed money makes you sink more in debt and saving money will forever be out of reach.
Start by Changing the way you save money
Before paying your Electric bill, water bill, Internet Subscription, and more, paying yourself first is a must.
In a way, you can think of it as buying peace of mind.
Having 3-6 months’ worth of your income in cash or savings account at your bank would serve as your buffer money also known as your Emergency Fund.
If ever an unforeseen event happens such as a family member has been rushed to the hospital for an accident.
You have spare cash you can use instantly.
How can you achieve peace of mind and what comes next?
If saving money after spending doesn’t work, what should you do?
Simple, Save before you spend.
Whatever left should be your budget for the next couple of days or weeks before your next paycheck comes.
If you think of paying yourself first as a must like paying your electricity bill, water bill, you will surely pay it first.
Is there a formula you can follow in saving money?
Yes, there is. For some, they follow the 50-20-30 Rule or the abundance formula.
What is the 50-20-30 Rule and abundance formula anyway, how can it help you save money?
50-20-30 Rule and Abundance formula is a budgeting approach you can use to allocate your money once you receive your paycheck.
50-20-30 Rule states that you should only spend 50% of your paycheck on your needs, 30% of your paycheck on your wants, and 20% of your paycheck on saving money or paying your debt.
On the other hand, the Abundance formula states that you should only spend 70% of your paycheck on your need and wants, 20% of your paycheck on saving money or paying your debt, and 10% of your paycheck on tithing.
There’s no such thing as a perfect approach to saving money. This formula can only be your guide.
What if you cannot follow this formula due to low income?
As I said earlier, the 50-20-30 Rule and the Abundance formula are here to guide you it’s not absolute.
The most important thing is to save money.
Remember: “A Peso saved is a Peso earned. What you save today can save you tomorrow.”
What’s next when you are done saving 3-6 Months’ worth of your income?
This is the time you should level up your peace of mind.
Invest in your health
Make yourself physically fit and add a factor of safety in preparation of you growing old.
That is to prepare for future medical expenses that can cover an unforeseen illness that might come along the way with old age.
Having health insurance intended for old age will come in handy by that time.
Remember: “Health insurance is cheap when you don’t need it, and it’s costly when you need it”
Adulting is hard, you have lots of responsibility to cover.
Ensuring your family’s well-being at the moment is one thing and planning for their future is another.
Breadwinners and providers of their family are smart nowadays, arranging a life insurance policy leaving behind cash assistance to their family that can last for years to come in case of their demise.
Their Insurance policy gives them peace of mind.
After you establish your emergency fund and have proper protection for your health and your family’s, getting ready for retirement is the next big thing.
You can prepare for your retirement by investing your excess cash on hand.
Either by investing in stocks, Cooperatives, mutual funds, or real estate even other investment forms you understand will work for you.
The idea is to make your money work hard for you.
Having passive income or getting extra cash with little to no effort on your part is a great way of building wealth.
While your active income or your job will serve as your means of providing for your family needs.
What if you want to fast track your retirement. Is it possible?
Yes, it possible. Have you heard of the Financial Independence Retire Early Movement commonly known as FIRE?
Instead of your usual 60-65 years old retirement, They plan to achieve retirement in their mid 30’s to early ’50s.
How can they achieve those lofty goals?
Their formula is simple:
- Save more money.
- Add more cashflow or earn more money.
- Make Money Works hard for them.
Saving money is just the start of having peace of mind.
You still have a long way to go and I’m excited to know how far you’ll go.
Would you start today? Would you use the 50-20-30 Rule? Would you use the abundance formula or would you craft your own approach in saving and investing?
Comment below your thoughts I’d love to hear from you.