Ways on How to Save Money

 

Ways on How to Save Money

Personal Finance

Are you sick of living from hands to mouth every month? Don't worry; you are not the only one facing this problem. Many individuals have problems managing their personal finance as they could never quite figure out where did their pay checks go to. To make things worse, personal finance is never taught in school and most people just adopt their financial habits from their parents, peers or whoever that has a large influence on his/her life. The media's role in touting the merits of consumerism and materialism also further encourages poor financial habits.

The All Important Equation in Personal Finance

Before you read on, we have to state an all important equation for personal finance. This equation is akin to law of gravity in physics. If you do not understand this equation, nothing you read further on will matter. The equation is :

Money Saved = Money Earned - Money Spent

Don't be surprised if you find this simple equation strikingly familiar. This equation is actually exactly the same as the equation for businesses' profit and loss statement where :

Net Income = Revenue - Expenses

As you can see, the only way individuals and businesses can save money or accumulate wealth is to increase our money earned (revenue), decrease our money spent (expenses) or a combination of both. This equation also encourages us to live within our means and never to spend more than what we earn as that could mean we will have to dig into our savings to get by.

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Ways to Increase Money Earned

1. Get a part-time job

Many of us have a full-time job which practically takes up all of our time. We always marvel at how some hardworking friends can teach part-time tuition, be a part-time housing estate agent or even run a business while still doing their full-time job. Well, marvel no more because if they can do it, you can do it too. Sometimes, all it takes is determination and proper management of time. It is also always good to pick up another job expertise which can potentially become your main full-time job in future. Getting another part-time job is also the fastest the easiest way to increase your income.

2. Upgrade your skills or knowledge for your full-time job

Upgrade yourself by getting more academic qualifications or going for courses to gain relevant skills. Paper qualifications do matter and it opens up more opportunities for your career. Although employers focus mainly on your attitude and ability at work, getting paper qualifications give you the base to get noticed in the first place.

3. Invest

The best way to preserve your wealth is by investing and the earlier you realise this, the earlier you will be able to attain financial freedom. While there are many real-life examples of how people lost their entire savings investing in various investment products, nobody told them to put all their eggs in a basket. Always diversify in all asset classes, learn and understand about what you are investing in and invest only what you can afford to lose. This means that you can lose everything you invest and yet have spare cash to live life comfortably for a while. Be prudent and you will definitely gain more than you lose over the years.

Ways to Decrease Money Spent

1. Keep a monthly account of your expenses

Keeping track of all your expenses is the first step to decreasing your expenses. At least take note of all your major expenses if it is impossible to track all your expenses. Although all the little expenses might add up to something significant, it is usually the major expenses that can be avoided. Categorise your expenses into "need" and "wants" and try your hardest to decrease the expenses for "want" every month. Make sure that your expenses are always lower than your income as that is how you save money.

2. Work harder to earn money

Have you ever noticed that you save more money when you work longer hours for any particular month? This is not a coincidence as the longer hours you work, the less time you have to spend money on recreational and leisure activities. Needless to say, this will not work if you splurge everytime you get off a period of hard work.

3. Force yourself to save and invest

Open a savings account such as the POSB SAYE Savings Account which forces you to save a definite sum every month. Choose an amount that you are comfortable with and do not withdraw it. You can also do so with an ordinary savings or current account if you are disciplined. You may portion a part of your savings to be used for regular investments. An example of a risk-free low return investment product will be Singapore Savings Bonds which are issued by the Singapore government to encourage SIngaporeans to save for a rainy day.

POSB has a Savings / Investment plan for Singaporeans of all ages to start small with just $10 a day that can help Singaporeans make their first step towards a comfortable retirement in the future. The plan can be catered for all ages and comes with a free Nespresso Machine for new signups in a limited time offer.

Good Personal Financial Habits

Ultimately, getting a good grip of your personal finance is a habit and something that you must be comfortable living with. This lifestyle change might be painful initially but once you manage to adapt to it, you will be in better control of your life.

 

Comments on Ways on How to Save Money

 

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