Saving is a good discipline that can help you achieve your short-term wishes and long-term financial goals as investments and, ultimately, financial independence.
Excellent reasons for saving
Once upon a time, people saved to buy things even before they could buy them. However, people have gradually moved from savers to those who spend money and are in debt due to credit availability. For many people, spending exceeds earnings, which means they use credit to buy things. In other words, they use tomorrow’s income to finance today’s consumption.
But the other and better way is to live within your means and save for the things you need, especially supplies. When you buy an item on credit, the chances are that by the time the item is paid for, its value will be much less than when it was purchased.
Additionally, interest was typically charged on loan, which means that the item’s actual value ultimately exceeds the original purchase price. Wouldn’t it be better to save money on product purchases, interest costs, and a discount because you will pay cash?
Understanding how to save
A simple way to begin épargne is to do it automatically, without much effort. It can be done by opening a dedicated savings account, preferably one that you cannot easily access or that will be subject to penalties such as lower interest rates for withdrawals.
Then set up an automatic transfer to transfer a specific amount from your regular account to this new savings account. Or you can talk to your payroll department about paying your paycheck into two accounts, the regular and the savings account.
How much should a person save?
How much should you deposit in your savings account? It is totally up to you! A good rule of thumb is 10% of your income, but you can change this as you see fit. Ten percent is not enough to start with, especially if you have outstanding debt. Start with what you can comfortably afford. This percentage can always be increased over time.
Learn about all aspects of your income, including overtime, commissions, bonuses, tax returns, cash gifts, asset sales, and many other things. Suppose your automatic transfer only transfers a fixed amount of your fixed base salary each billing cycle. In that case, you may need to move the interest amount to your savings manually to account for additional income.
Use the miracle of compound interest. It begins to earn interest on previously earned interest, although its most dramatic effect appears after a more extended accumulation. After all, you may want to consider setting up some savings accounts, such as a savings account for supplies and what you might call your “equity account.” It is your investment account where you buy income-generating assets.
At the end
The amount you earn does not affect your ability to save, and what matters is not the amount you gain and how to use it. The point is, it doesn’t matter how much you save or when you start saving; what matters is what you start.