Many people struggle because they find it difficult or are simply bad at creating good habits for a regular savings plan. This article provides the steps required for you to do so. All you need to do is follow them!
You have to remember that generating wealth requires years of patience and dedication, so if you are looking for ways to get rich quickly, this article isn’t what you’re looking for. However, if your goal is building financial security and increasing your net worth over the next few years, then read on.
Create a budget
The first step is to create a list of all the expenditures in your household each month, including things like rent/mortgage, utility bills, food, travel, entertainment, etc. Then on another list, write down all your monthly incomes such as employment income and what you get from investments. Subtract the total expenses from the total incomes, and if there is a positive number left over, then it means you can save some money this month.
Savings account with the highest interest rate.
The next step after creating your budget is to sign up for a savings account that will offer you the best possible interest rate. If you are looking to build more wealth over time, then opt for an account with the highest amount of interest because it means your money grows faster and more significantly! Some people may be wondering why prioritize saving when they could instead make additional investments in the stock market?
The answer is pretty apparent; saving allows you to grow your wealth on a scale that makes no sense compared to investing due to its low-risk profile. You can’t go wrong with investing, but what happens if at some point along the way you lose everything, whereas saving ensures that no matter what happens, you’re always better off than you were before.
Track your progress
Once you have opened a savings account, it is essential to track your progress every month to learn from your mistakes, correct them, and keep moving forward. Several apps are available for this purpose, but my personal favourite is a fantastic piece of software called ‘Monevator’, which provides a detailed analysis of all your financial information. The best thing about this software is that you can use it for free.
Make monthly contributions to your savings plan.
Now it’s time to make those regular contributions. This step is vital because if you don’t save anything at the start, what will happen when you come across an opportunity, like buying a new car or planning a holiday? You won’t have any money saved up, meaning that suddenly taking advantage of that opportunity becomes far more complex.
So how much should be contributed each month? Everyone has different financial priorities, so what you should contribute will depend on your situation. Try and put away somewhere between 10-20% of your monthly income as a rule of thumb.
Never touch your savings plan without reason.
The final step is probably the most important one; don’t touch your savings unless it’s for one of two reasons. Firstly, if an emergency requires spending, such as medical bills or losing your job, you can dip into it.
Secondly, once you’ve created enough wealth through saving and investing, then at some point down the line, you’ll be able to reach financial independence meaning that no matter what happens from now on, you’ll never have to work again. Once you reach this point of financial independence, it’s okay to touch your savings plan as you don’t need the money anymore.
When setting up a savings plan, keep these steps in mind because they will help guide you toward success. Remember that every little help, so even if you can only save $10 each month, doing so is still better than nothing, no matter your goal. Good luck with growing your wealth!