You get two huge benefits from having money in the bank. First, it feels good because you can see yourself making progress towards your goals, according to www.thebalance.com. It is also good for your finances because you can absorb shocks and surprises without taking on (sometimes toxic) debt. But how do you actually increase your account balance to the point of having a healthy chunk of change in savings?
Save more and spend less
That knowledge alone is usually not enough, but the tips below may help you pull it off. Before you get into the tactics, it is wise to think about your goals. This will make the whole process more bearable and improve your chances of success.
Pay yourself first
One of the most important steps to take is prioritising saving. You probably know exactly how much you spend each month on housing – either rent or mortgage payment. You need to make that payment or you are out on the street. Can you say the same about the money you put towards your financial security?
The best advice is to pay yourself first, which means making sure that you actually save money. When you make it a priority – especially if it is a line item on your budget or an automatic process that you can forget about, it can become a reality. Having a fuzzy desire to save more is not enough for most people.
How can you start doing this today?
Set up an online savings account and start with a few naira if that is all you can afford. Tell your employer to send a portion of your paycheck to a savings account – not the current account you use every day and withdraw cash from.
If you use a budget, create a new category for monthly savings.
If you are in a leaky boat, you need to fix the problem quickly. The fastest fix for most people is to cut costs. It is also the most painful (and it might not be the most effective), but it is a necessity if you want to increase your savings.
How do you do it? Get a handle on how you spend. Track your expenses, whether you use a pen and pad, an app, or budgeting software. Don’t put too much time and energy into picking the best system to track your spending because that is just a distraction (in this case the perfect is the enemy of the good).
If you have a hard time keeping track of things, spend electronically so that your bank creates a record of every transactions. Make purchases with a debit card and minimise cash spending.
The numbers won’t lie. Look at where your money actually goes, and evaluate if you are really getting what you pay for.
Three ways to earn more
By cutting costs, you can save money this month.
But you will probably get better results if you increase your income (unless you are one of those people who earns six figures and is still in debt).
Unfortunately, it takes time to earn more, and it is not as easy as cancelling cable TV service. In some cases, switching jobs is all it takes (if you have been with the same employer for many years and raises have been slow), but most people have challenges in this area.
One quick way to earn more is to have a part-time job. That also means you have got less time available for other things, and it is grueling to keep it up for decades. But, if you just need a quick boost, another job for a few months may get you back on your feet and your main job will support you and your family after that.
If you need a more substantial change, start your own business. You will have more control over your own destiny, and more upside potential.
You can manage your risk by starting part-time on the side, and then transition to a full-time gig as things pick up.
Another tried-and-true approach is to develop your skills and employability so that you can earn more over time. That may require more training and education, as well as a resume that highlights your value to employers. Over the years, your efforts should pay off.
Once you have built up your bank account, start earning more in addition to the money you have saved. This won’t make or break you financially, but you don’t want to leave cash on the table. Make sure you are earning a competitive rate on your savings, and use fixed deposit and money market accounts to earn more interest.
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