Simple Yet Efficient Plan To Save Money
Save Money: Clear and Easy Plan for Saving. The times are already hard, and it is getting even tougher with Covid19 pandemic and the crashing markets. Since at least the last two years, economists warned us of a global economic slowdown. 2019 was supposed to be the year of the global economic slowdown, but somehow the debt-fueled global economy got through. 2020 however began with ill augury. In January, USA and Iran came within a whisker of escalating their tensions into a world war. The world had dodged a bullet when their tensions cooled down, but who knew that the world may experience additional difficulties, for example, Covid19, oil price wars and more crashing markets.
This created a very tough financial situation throughout the world. Global trade slowed down and as many countries go into partial or complete lockdowns, many people risk losing their jobs. Therefore, it is only prudent to prepare for what is coming. The scenario created by the global pandemic will not end soon. It may take over a year to develop a functional vaccine and even then it may take quite a while to deliver the vaccine to every country. One can imagine what a logistic and political nightmare that will be. The lockdowns will continue, and they will have a cost on the national and global economy.
In such a situation it is wise and prudent to save up money for the coming times. To tell you the truth, the ideal time to save was about two to three years ago, but it is never too late. Although saving money is very simple, but many people find it difficult because they do not know where to start. So let us look at a step-by-step guide on how to save money.
1. Make a Budget
Make a budget and save money. Yes, this may sound like a cliché but this is the first step that you need to take to save money. People simply do not take budgets seriously enough. Every corporation and business prepare a budget in order to manage their finances, they cannot run without it. A house is the same. If you do not make a budget and follow it, then you may not feel you are doing anything wrong, but your finances will not be managed properly. To manage your finances properly and efficiently it is vital to make a budget and stick to it.
–Determine your Cash Inflows
Firstly, note down your cash inflows and your expenditures. Whatever you earn, be it through your day job or freelance work or your investments. Write down whatever you earn in a month or in a year. This will give you a clear picture of how much money you are making.
–Determine Your Expenditures
Next step is to get your expenditures in order. Make a list of your monthly expenditures like utility bills, fees and taxes. You should also add in the average figure of your grocery. Once you have got all the expenditures noted down, you can now have a clear idea of how much you spend each month.
2. Increase Your Savings Rate
Increase your savings rate. This allows for a clear and easy way to save money. An average person saves around 20-30% of their income. If you are saving around this much, then it is fine, but you will need to increase your savings now. This is the perfect time to increase your savings rate, especially if you are in lockdown as most of our expenditures have now stopped or at least restricted.
If you were not saving this much, then firstly this means you were overspending and so you’ll need to carefully cut your expenditures and secondly as mentioned before you will need to take your savings rate up.
The times we live in require a savings rate of around 40–50% of your income. An average person can save around 40% of their income if they manage their expenditure properly, but going above 50% requires serious lifestyle changes.
If you think you can go the extra mile, then you can try aiming at a 60% savings rate by making some drastic changes like cutting down cable and using only internet to remain connected, limiting you’re dining out nights by buying fresh from the farmers market and making meals yourself, etc.
–Think before spending each penny!
These are difficult times and before spending, we must think twice and ask ourselves if we really need to spend our money or not. Personally, I have cut down all unnecessary expenditures and I am only spending on groceries and utilities. Absolutely nothing else!
3. Invest Your Savings
Invest your savings offer a clear plan to save your money. What many people forget is that to save effectively you also need to invest your savings. Because if you keep your savings at home idle, then inflation will simply eat away those savings. However, in these times one needs to have some cash at home for any emergency situation. You can determine how much emergency fund you need to have at home and whatever is in excess should ideally be invested in a safe investment.
Now, stock markets are already volatile and unless you are a professional trader with years of stock market experience, I would not advise you to invest in stocks. No, for that would be too risky. At this moment there is only one safe haven for amateur investors and that is gold. The prices of gold are not only skyrocketing but also safe from the risk of loss. Investors run to gold to hedge their investments whenever stock markets crash. So if you can, then try to invest your savings into gold. As it will save them from risk of being depreciated but they will also appreciate as gold rises in value.
Save Money: Clear and Easy Plan for Saving. This is a very simple money-saving guide. Yes, the times are tough but there is no need to worry or panic as that will only make matters worse. Think of it this way, literally the entire world is in this together and so there is no point in getting worried over it. Just follow the steps mentioned above, take your time to make a budget, look at your income and expenditures and adjust them accordingly to increase your savings rate and then look for a safe and appropriate investment opportunity. It does not require a lot really and since most of us are in lockdown at home, there is plenty of time to look into our finances and take care of everything accordingly. Hopefully, we will all come out of this better organised than before.
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Also See : Can We Live Within Our Means and How?