“I’ve found the road to wealth when I decided that a part of all I earned was mine to keep (George S. Clason, 2013) “Taken from the Richest Man In Babylon”
Savings, savings, savings. By far the hardest thing to do when you’re broke is to save. Trust me, I know. We’ve all been there. When you’re living pay-check to pay-check the last you want to do is put away some cash into your rainy day fund when it feel as if you’re already in the storm! Bills are due, an unexpected expense pops up and everyone’s got to eat, right?
Despite all your worries, it is important that you develop the habit of putting something away each month as saving and budgeting are one of the main components of great money management. Life has this funny way of bringing up the unexpected and having a go-to fund can help take the edge off when needed. It is also important that you save in order to be able to invest in the things you desire; whether it is that trip to Europe you’ve been putting off, a course about first time investing, a house deposit or even for some peace of mind at the end of the month.
“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth should grow. The sooner you nourish and water that tree with consistent savings, the sooner you may bask in the comfort beneath its shade (Clason, 2013).”
I wrote out the quote above and put it on my fridge so that every day I would be reminded that I could overcome the financial struggle I faced. At first, it was hard to put even $10 away when I didn’t know if we could afford to get by until next month, however each and every time it got easier. While I found that I was still far from being comfortable, those little savings gave me some relief that whatever money troubles may come my way, I would be able to face them. Eventually a few dollars each month turned into a few hundred which then became thousands and I woke up realising that I was no longer broke!
The 5 Steps to Saving
Here are a few tips I followed when trying to save while being broke;
The first step to saving money is having a budget set in place. Assuming you’ve already have a budget, the first step is figuring how much you can save each week without having to compromise too much. For example, if you make $500 a week but can afford to live comfortably less, why not put the leftovers into a high interest saving account?
Each month, delegate a percentage of your salary that you wish to save, which could be as little as 5%. Account this amount when finalising your budget as it allows you a clear understanding of what you can spend while also saving you money.
- Pay yourself first:
Whenever any money falls into your hands, put away your allocated percentage into your pocket first! Do not pay the rent or grab a treat, pay yourself. The creditors and bill collectors can all wait. This is the most important step after budgeting. After paying for my expenses, I would often find that anything leftover would be spend by the time my next pay check arrived, leaving little to save. Again, pay yourself first! You can’t spend money you don’t have, which brings me to the next step…
- Separate your banking accounts:
I did all my banking with NAB, however I found that by having my spending and savings account linked together, it was far too easy to transfer money from one into the other. Whenever I looked at how much money I could spend, my mind would automatically add up the total of both accounts, making me dip into my savings often.
I decided to open up another high interest saving account with ING, who happened to have a better rate then my original bank. From then onwards, every time I wanted to access my savings I would have to go through the hassle of dealing with another banking system, making it much easier for me to cure my reckless habits.
- Smart Spending Habits:
Make the most of your money. Invest in yourself rather than simply spend your savings. Purchase educational books, go to a course and learn a skill, buy stocks and keep looking at the bigger picture. Whenever you hit the “Purchase” button, think whether this transaction will bring you a short term satisfaction or a long term one. “An asset puts money in my pocket. A liability takes money out of my pocket (Kiyosaki, 2000).
The knowledge that you acquire is yours to keep forever. Your greatest asset is and always will be your mind. The better you nourish it with education, the bigger your wallet will become.
- Get more bang for your buck:
Everyone has expenses – it’s a fact of life. However, some expenses are more warranted than others. Have a hard look at what your money is getting you and ask yourself “If this the best I can do?”. Is there something that you’ve subconsciously been paying for that you replace or compromise on? There are countless ways to save if you take an objective look at your spending habits.
When it came time for me to ask myself that question, a few realisations were made, one of which was my unused gym membership I had been paying for the last 6 months. Another was a Netflix subscription. These are minor things in my life that I felt I could easily replace for something better. I traded my gym membership for a jog in the park with my partner (free) and borrowed new release movies from our local DVD shop (yes, they still exist) for a fraction of my Netflix subscription.
“That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary (Clason, 2013).”
There are 101 ways to saving money, with more or less obvious ones such as shopping the sales and unplugging your TV at night, however most of them simply don’t seem to go anywhere. The tips above helped me dig myself out a hole and actually enabled me to grasp how to save and manage my own money wisely. I learned the art of paying myself first, and so should you.