First, I want to convey you about the importance of an emergency fund. It is important to be prepared for emergencies. If such an emergency occurs, it is best to have a buffer so that you don’t have to go into debt for unexpected expenses. Start saving for your emergency fund first. In the blog post Create an emergency fund, I explain the details.
How can you save more easily?
Budget
Start by creating a budget. A well-prepared budget gives you a clear view of your income and expenses and is the foundation for getting your finances in order.
In your budget, make sure you have a fixed category called “savings”. Here you register the amount that you wish to save each month. Make a realistic estimate of this savings amount. Not too little, but not too much either. If you have to transfer money back from your savings account to your current account every month, you’re not really saving any money.
Separate account per goal
It’s easier to save when you have a goal in mind. The trip you’ve long wished to take (not with corona for now, but we’ll leave that aside), a second-hand car, renovations to your home, and so on. You can open a separate savings account for each purpose. I recommend you to open these accounts at another bank. Why? When you are tempted to transfer money back to your current account, the transaction coming from another bank is not executed immediately, and therefore you cannot (yet) spend this money immediately. This is psychologically important.
Pay yourself first
Using the “pay yourself first” technique you literally pay yourself first, and you can prevent yourself from spending all your money. Most banks allow you to set up an automatic savings transfer, and here you instruct the bank to automatically transfer an amount to your savings account each month. The best timing for this automatic savings order is just after your income comes in.
Small amounts
Start small, Rome was not built in one day. If you save 50 euros every month, you will have saved 600 euros after one year.
Try to increase the monthly savings amount each time your salary increases or, for example, by saving on your groceries.
Cash
Cash payments are out-of-fashion, but it is efficient to avoid spending. I try to pay my expenses in cash as much as possible.
At the beginning of the week (or month) you take a fixed amount out of your current account and that’s how you have to make ends meet. Paying in cash is like a mental barrier. You literally spend your money (and this will make you spend less 😉 ).
Extras
It is wise to save extra income such as vacation pay, year-end bonus or a one-time bonus immediately. With a well-prepared monthly budget, you rarely need this extra income.
Once you have saved up an emergency fund and paid off any bad debts, then you can start planning and investing.
Good luck!
Do you have any other tips to save more? Let us know in the comments!
This info is for informational, educational and entertainment purposes only, and does not constitute financial, accounting, or legal advice. Please do your own research (disclaimer).