How often do you set aside cash for a rainy day? And if so how much from your income? These questions seem to be simple, but the answers can leave with a migraine. In most cases, we tend to forget to save and start spending. This starts gradually and in the end becomes a habit. As they say, human beings are creatures of habit.
Well, this is a habit you need to break to protect your future. What happens if you lose your mainstream income? How will you survive while on a job hunt?
A good spending habit is a stepping stone towards financial freedom. This is why you need to train your brain on how to save and not splurge. Below are simple hacks on how to develop a money-saving habit and paying off debt faster. Let’s jump right in!
5 Ways to Develop Money-Saving Mindset
1. Be creative
Having a creative system goes a long way when it comes to saving. Two spending habits that increases your savings are splurge-save and save by putting it aside.
Well, mentioning when you splurge-save, makes you think it’s counterproductive. Considering splurge is known to be a bad spending habit, but let’s break it down. The rule suggests when you splurge to purchase a product or item remember to save the same amount.
For example, if you want to purchase the latest’s iPhone and it costs around PHP 37,990. The same amount should go into your savings account. That means you can take care of your wants and needs at the same time without straining your finances.
The other concept is transforming your thrifty living into spending. This means when you save cash you must deposit it. This could be in your account or the savings basket. For example, you are used to fueling your car every morning. But instead of using the car, you opt for public transport. This saves you an extra of about PHP 300 which you would have spent on fuel.
Note the money isn’t saved if you haven’t deposited it.
2. Have Financial goals
For you to train your brain on how to save, you need to have financial goals. Reminding yourself about your long and short-term goals keeps you in check. Think of your investments and time, how long shall it take you to achieve them?
Once you’ve the plan drawn out, take a picture of it and stick it at the back of your credit card. Thus, whenever you’re using the card, you are reminded Not to spend but save.
This is another way of developing a mindset towards saving. Before making any purchase visualize the actual cost. By this, we are talking about the actual purchase price. How much do you earn per hour? Once you have attained the amount equate it to the hours needed to purchase the item in question. This helps you to know how many hours you need to work to pay for the item.
Here is how to find the actual hours (Monthly Income- expenses)/ 30 days. Then equate it to the initial cost of the product. Comparing the price to your hourly wages gives you an idea or framework of how long you need to work to purchase it.
4. Control your impulsive buying
The best way to control your impulsive buying is by observing the 30-day rule. This may sound complex but it is very easy to apply. The rule states before purchasing any item you wait for 30 days to elapse. During this period, you are to think of whether you need the product or not. Is it worth your hard-earned cash?
For this rule, we require you to have a list of every item you wish to possess. Also, include the amount it costs for every item and the day for the intended purchase. Once the items are listed check the boxes if they are about to reach the 30-day mark. And ask yourself if you still want it and can you afford it.
If the answer is yes, then you are good to go. Purchase it and then remove it from the list and move to the next item. Though, you must rearrange your list and change the dates. And after 30 days you can repeat the process. The best thing about the rule is it gives you a chance to reward yourself after a long restrain. That also helps to curb your impulsive buying habit
Having a strict budget helps to mold your mindset towards savings. Your budget plan ensures you spend only on your needs and not wants. And after the needs are met the rest goes to your savings account.
Keeping a zero-sum budget helps to keep your spending in check. But before you begin this particular task, you must pen down a list of your income and expenses. Once you have established them, minus your expenses from your monthly income. And what remains is your surplus cash.
Now it’s time to consider what are your wants. What have you been craving for? Create a list of your non-essentials and then minus their total cost from the extra cash. The remaining balance is then sent to your savings account directly before taking care of other essential and non-essentials.
How to pay off debts faster
Now that we have talked about how to save money, it’s time we look at debt management. This is a topic many find uncomfortable, but we have to. They say your wealth is measure by the amount of debt you have. This is true since it turns into a liability if not taken care of in time. In this section, we’re going to look at the best ways to settle your debt faster.
Settling the most expensive debt
The first step is looking for debts that have accumulated a lot of interest. Take a pen and list down all your debts from the top to bottom. Once you have done this access which one has the highest interest rates and settle them. That gives you a chance to stop the interest from accruing and later focus on the lower interest rate loans.
Paying more than the minimum balance
The next step of settling your debt is paying off more than the minimum balance. When it comes to debt management there is no need for micro-managing. Since you need to settle the debt on time and within the stipulated interest rate cap, pay more than the minimum. That guarantees you finish the debt on time plus the bank or lender might reduce the interest rate.
Use debt repayment app
The best way of settling your debt faster is to have a list. You can’t pay for something you know nothing about, yet interest is being accrued. Considering you might be having various portfolios running, having a repayment plan helps a lot. Hence make use of a debt repayment app. That guides you on the debts which need to be catered for before the actual date.
Increasing your income stream
Also, earning extra cash is a great way of settling your debt on time as well. That’s why, you need to invest your monthly income to increase revenue. This is not the time to shop or take a trip while having a debt over your head. You could choose to invest in trade options, stocks, P2P lending in Robocash.
Furthermore, some banks offer investment portfolios that generate extra cash. That can then be used to settle your debt. In other words, find something that increases your earnings to enable you to settle your debt on time and with ease.
For you to save cash this year you need to master your finances. That starts from the way you are spending to how you handle your debt. The two go hand in hand and you can’t say you have learned how to save, yet you have loans pending. Balance the two as you settle the loans save and curb your spending.