We all know how our earnings can sometimes be a bit challenging to stretch, but that shouldn't stop us from setting aside something for the future. It may not be much, but at least, there's something - better than nothing.
Through the years, I think I've managed to formulate these simple steps on how to have the dicipline of saving. Hopefully, you too can apply them as you handle your finances.
Step 1: Know how much you really earn
Everything starts with knowledge, and knowing how much you really have will give you a perspective of your financial capacity. If you have other source of income, the better. Having this knowledge will set your eyes on how much you can really spend and save.
Step 2: Keep things to the basics
After knowing your financial capacity, the first thing to do is to know what your basic expenses are. Ask yourself: What are my day to day basic expenses? We all have different idea of what is "basic" like food, transpo, personal stuffs, monthly share at home, etc. As long as you keep your expenses within these basics, you'll be financially fine.
Step 3: Spend below your means
You know how much you can spend, and you know what are the basic things that you need to spend on. If there are still some left (hopefully), now's the time to spend some for yourself.
This is actually a weird advice - "to spend" when we are talking about saving. But for me, saving is useless if you are miserable. There's nothing wrong to enjoy your hard earned money. And for me, the first step towards finding the value of your money is to actually SPEND IT!
HOWEVER, here comes the 'SAVING' part - YOU MUST SPEND BELOW YOUR MEANS.
The old advice "spend within your means" is already outdated. You really don't have to exhaust every funds that you have if you can save it. The turning point towards achieving the attitude of saving is to discipline yourself NOT TO SPEND EVERYTHING. It doesn't have to be too much because we're not towards the amount here - we are towards DISCIPLINE.
This is the pivotal step towards achieving the dicipline to save, and I have some tips for this one.
Tip # 1: BUDGETS ARE DONE WEEKLY
Some people prepare budget on a daily basis, some monthly, or bi-monthly, but the proper way really is on a weekly basis. You should prepare your budget probably on weekends and try not to exceed on this weekly budget. You should be aware of your payables on the coming week and clear that out as well. Again, dicipline is the key.
Tip # 2: LEAVE SOMETHING UNTIL AFTER PAYDAY
You should leave some funds for you 1 - 2 days after the payday. Why? Because the worst time to withdraw on the ATM is during paydays (of course), and I simply hate the long lines and the inconsiderate people around this time (you know, those who take too much time in the ATM knowing that the line is already too long). So, if you're doing Tip # 1 and payday falls on a mid week, then you don't have to waste your time withdrawing cash when your salary comes. It also adds some bragging rights when you still have some funds left a few days prior to payday when other people are already struggling to survive. hehe
Tip # 3: THE 400/900 RULE
Have you ever found yourself paying for the jeepney fare w/ only a 500 peso bill on your wallet? Tsk! Tsk! Tsk! Chances are, you will get scolded by the driver (Or much worse.)
What's the solution?
I call it "The 400/900 Rule"
It simply means that when you withdraw cash from the ATM, these are the only amount that you'll going to use - either 400 or 900, so that you'll have some hundreds w/ you (and not just 500's or 1k's). Having smaller bills to spend is both efficient and at the same time, avoids the hassle (and humiliation) of not having a smaller bills to spend with when needed. It also avoids that unnecessary expenses just to have a smaller bill.
If you will get money to pay for bills, it's still nice if you have these amounts when you withdraw (e.i. 1,400.00 or 2,900.00)
Tip # 4 : NO LOANS, NO CREDIT CARDS
If not properly managed, these two (especially credit cards) will be the start of your downfall, so it's better not to have them. Again, live below your means.
If loans cannot be avoided, you should then go back to step one w/ a reduced financial capacity, and then adjust your perspective as well as your other expenses.
Credit cards will only give you the option (err, the temptation) to spend beyond your capacity. You're blessed if you can control these monsters, but I still suggest to keep your hands away from these. Believe me - you'll be so much better without them.
Tip # 5 : DO NOT SPEND YOUR BONUS
Unless it is very very (and one more "very") important, BONUSES ARE BETTER LEFT UNUSED. They should form the intergral part of your savings. It presents the best opportunity to save. Why spend a month's salary when you already have the budget for it? Again, discipline.
Tip # 6 : BE CAREFUL WHEN GIVING LOANS
You should be careful when letting other people borrow money from you. Trust only a few people when giving loans. It's your money afterall, not theirs.
C H E C K P O I N T:
Before you go to the next two steps, it is expected that you have finally achieved the discipline to spend less than what you earn.
Now we have to check your VALUES here.
You have to ask yourselves: Where am I really happy with - w/ saving or w/ spending?
Whatever your choices are, you should know that you cannot take both of them - it's either you spend or you save (as if that is not too obvious.) But the thing is, you should be happy with your choice whatever it is. Still, whatever your choice is, you're still saving something (provided you maintain what you learn from Steps 1-3).
Step 4: Compromise and be contented with it
You're living below your means, you're enjoying your money and at the same time, saving something. At this level, in order to increase your savings, you must compromise some of your non basic expenses.
Do you really have to buy new clothes every week? or that famous coffee drink? or that new gadget in town? or that monthly magazine?
The more things you compromise, the more you'll save, but you should always be contented w/ your compromise. That way, you will not feel that you're depriving yourself too much. Again, spend or save, you should be happy w/ the choice you've made.
Step 5: Be happy with your expenses
At this level, you'll finally realize that there are some non basic things that you cannot compromise. This is actually good for your self being, and like level 4, you should be happy with it. You will not have much savings because of them, but at least, you're happy.
Also, in this level, you might want to juggle this w/ Step 4 every now and then to increase savings. Again, like level 4 you should be happy w/ your choices.
Before, my only financial rule is:
"I'll spend carefully in a carefree manner, and whatever's left are my savings."
Very ironic (and very difficult to explain and understand), but in the long run, I think I've managed to make saving an ART on its own through this simple mantra.
Saving is an attitude, a discipline, and an art. It is not intended to make you rich, but it is the starting point towards financial freedom.
But saving is useless if you are miserable. Knowing your money's worth relies on spending it properly. Nonetheless, just keep in mind too that you will never know your money's worth likewise if you're left with nothing to spend with in the first place.
Saving is not really intended to make you rich, but somehow, it is a good starting point.
In the end, money is useful a tool provided you know how to handle it. You should always be the one controlling it, not the other way around, and having the discipline to save is the first step towards it.