Saving can be tough in this current environment, but that doesn’t mean you should give up on building a financial nest egg for you and your loved ones.
While growing your savings undoubtedly takes a degree of effort, there are some simple ways to start on the path to financial security.
Get on top of your budget
There’s little chance you’ll be able to save much money if you’re not keeping good track of your cash. This is why it’s important to create a budget — and stick to it.
When it comes getting your budget started, kick things off by taking a look at your income and expenses. Once you’ve established your income — payments like your salary and other types of capital gains — figure out what you’re spending your money on. This includes fixed costs like rent and food as well as discretionary spend such as entertainment and non-essential shopping.
Cut your expenses where you can
There’s no point in just having a firm grasp on where you’re spending your money – that’s only half the battle. The key is cutting spending so you can allocate more money to your savings. Although depending on your situation during the current economic environment, it may be a much harder time than usual to do this.
Some common strategies include seeking out better deals on your regular payments — things like bank and utility bills. It could also pay off to switch to cheaper brands of clothing and food, or cut down on under-utilised subscription services.
Consider a savings account
Once you’re on top of your household budget, a good way to take the next step on your savings journey is to open a savings account that offers high interest.
You don’t need much money to open a savings account and you get to earn a small portion of interest on what you deposit. It’s worthwhile comparing savings accounts, allowing you to find the most competitive interest rates.
What about investing?
While a savings account is a fantastic way to get the ball rolling on achieving your financial goals, you may also want to consider investing if it makes sense for you.
The Raiz Philosophy is to invest small amounts regularly, even in falling markets as this can help you to ride out the downturns in the market and is one of the keys to having a healthier balance over the long run. This principle is known as Dollar Cost Averaging.
Compounding happens when you let the returns on an investment build up so that you are earning return on your return. Given enough time to work its magic, it provides the potential to reach a stage in your life where your money is working hard enough to provide a substantial part of your income.
Build an emergency fund
Building your savings should be about achieving your financial goals, but don’t forget to also prepare for when times get tough – the current coronavirus pandemic for example. This is where an emergency fund can be super helpful.
Depending on your particular circumstances, you may need to build a sizeable emergency fund, or one that just needs to get you through a few weeks without regular income.
Whatever you may need money for down the track, it makes sense to prepare for a financial shock in order to soften the unexpected bumps along the road.
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