How to Make a More Sustainable Savings Plan is actually quite difficult. Saving requires a lot of self-control, and natural human habits are usually bad in managing finances. The good news is that there are many easy ways to save in our country.
However, in the long run, we may need to be able to understand effective ways of saving such as:
1. Make a Savings Plan That Really Works
Actually How Much Savings Do We Need? Ideally, set aside 20% of our monthly income, and keep saving until we have enough money to cover living expenses for six months to become an emergency fund.
Why six months? Now, if we are laid off or we are in a situation of being unable to work, six months gives us time to recover financially.
At the same time, we do not want to overdo it by saving our expenses for five years - this is because savings are not invested, and do not keep up with the inflation rate, which currently reaches around 3%.
2. Differentiating Investment VS Savings
Many people misunderstand investment and savings. A savings fund is an amount of money or a liquid asset that we can access right away. This cannot be counted as for investment because its value could fall due to economic decline.
If we invest in a form such as an endowment plan or bond, there is always a period of time that we will have to be prepared to commit to long-term (for example, planning for children's future education) because we will have to wait for 5, 10, or even 20 years before we can withdraw the money.
If we try to withdraw money before the due time, we will only get a small portion of the investment. In addition to getting less money than we expected, it can disrupt our retirement plans.
Conversely, our savings must have a safe and easily accessible place, such as a separate savings account, or to Digibank by DBS with savings up to 3%, but don't worry too much about it - this savings is intended to help us in difficult times, not to increase wealth. If we want to increase wealth, we must invest while saving.
3. Automate Savings
Use services like GIRO to separate our savings (20% safe amount) into separate bank accounts when the salary goes to the main account. We must assume that the money is not there.
If we don't see money in the main account, we won't spend it and, we won't be tempted to spend it all. In addition, we can also use the spending tracker feature of many applications to further limit ourselves if our expenses have exceeded the budget.
4. Change the Perspective About Discounts
Many are consumed by seducing discounts. For example, we changed the internet provider from $ 40 to only $ 20 a month. For most people, this means we have managed to save $ 20 a month.
But in reality many people do not really 'skimp'. They congratulate themselves for 'saving' $ 20 a month ... and then immediately go and spend $ 20 to eat more expensive food in the restaurant.
The same thing happens when shopping for unnecessary purchases. For example, we buy a headphone device, because the promo goes down the price of what was once $ 10 to only $ 5.
Actually, everyone only needs 1 headphone device, so instead of saving $ 5, we actually throw away $ 5
So, make sure that when we succeed in reducing the cost of something, we save the difference. Buying goods is cheaper because the discount isn't saving - it's just a marketing ploy.
5. Limit Your Credit Facility
The more credit facilities we have, the more temptations. There is no need to have ten credit cards, nine credit lines, and more financing options than we can count.
To avoid temptation, close a credit account that you don't use to avoid temptation and maybe just 1 credit card with the most beneficial benefits
6. Achieve the "Critical Point"
This may not be for everyone, but some people have a "tipping point". This is the point where saving becomes a habit, and not saving is more difficult.
For example, we might feel so happy after saving $ 10,000 that we just want to keep adding to the savings. Seeing the money in a bank account can give us a positive impetus, which makes subsequent savings easier.
What's more, if we have the right savings fund, we don't need to use high-interest loans, even in an emergency.
7. If You Have Debt, Installments While Still Saving
We still need to save money (at least 10% of basic salary), even if you have a debt to pay. Otherwise, we can be trapped in a vicious circle. For example, we owe $ 200 and want to pay it off. Our monthly salary of $ 200 comes in, and we decide to issue $ 200 to pay off all debts at once. Of course it doesn't make sense.
What if there are other unexpected emergencies? What if there is a sick family or we suddenly lose our jobs? We will not have cash reserves to solve this problem, which in turn could lead to more loans and continued debt.
To get out of it, set aside some money for emergencies, even when we are finishing paying debts.
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