How to Save to Build Your Finances
In order to become financially free, you need emergency funds, retirement funds, and assets and equity. You can do these things only when you have started saving money and investing money. When you have emergency funds, you do not have to worry about money during emergency situations. When you have built retirement funds, you do not have to worry about paying your bills when you can no longer work due to health or old age. If you have assets, for example, a house, you can create income from your house by renting. Therefore, having an asset will help you generate income. If you have assets in stocks, mutual funds, ETFs, etc, you will be able to generate an income, which is completely passive. In order to become financially free, you need to build multiple income sources and some of these sources must be completely passive and you don't have to work to generate income.
Saving Money for Special Occasions
There are many purposes of saving money, for instance, you can save money for your financial emergencies, you can save to build your investment funds, you can save to buy house or a car, you can even save for special occasions, for instance going on a vacation, etc.
If your income exceeds regular expenses, saving for special occasions is doable. However, if your finances are not in good conditions, you will have to cutting your all unnecessary expenses to save money. Regardless of your financial situation, you should start saving for important events because purpose of saving is also to enjoy life.
I think it is really easy to make this decision about when to spend and when to save, or how much to save and how much to spend. You should only spend on essentials, once you are done with spending on essentials you need to save the remaining money. You should always limit your spending to 50 percent of your income and save the remaining money. When you are saving money, you need to save under different categories such as saving for luxury (for instance buying an iPhone, going on a vacation, buying a house, etc.), saving for emergencies, and saving for investment.
What is the Best Way to Cut Your Spending
Frugality is very important for financial freedom. One of the easiest ways to living a frugal life is by scaling down your lifestyle and avoiding unnecessary expenses. You can achieve your financial goals of saving money, buying property, investing in assets, etc. by keeping financial requirements low. Scaling down your lifestyle to live on a comparatively lower income will allow you to have surplus funds. For instance, if you move to cheaper location, your rent will go down, thus you will be able to save and invest. You can avoid unnecessary expenses by questioning the proper utility of your purchases is instrumental in achieving financial goals.
Saving Money on Food
Food is one of the biggest contributor of expenses and interesting thing about food is it is essential item and you cannot stop eating because of high food bills. However, there are strategies to reduce your food bills and in the mean time save money. The best way to do it is by skipping the restaurant and eating at home or only eating home cooked food. You can also switch to cheaper foods. For instance, you can avoid eating meat products and get protein form plant based diet. Another way to save cost is by growing your food. You can start growing vegetables and spices.
Food is essential, you need to eat to survive, therefore, your first priority is always to spend money on food. Therefore, food is number one expenses for most people. If you check your monthly spending, you will see most of your money goes into buying food and things you need for food (gas, for instance). If you want to save money, the first step is to start cutting your food bill. There are a lot of ways to do it. You can start cooking at home, it will cut your food bill b 20-30 percent. You can also start growing your own food through indoor gardening. There are a lot of ways to grow food at home. Cutting expenses on junk food and limiting tea and coffee consumption further reduces food bills.
Invest Your Savings For Better Future
A lot of people say you need to save at least 10 percent of your income. However, my strategy is to save at least 20 percent of my income. When I receive payment, I deposit 20 percent to my savings account. In a few months, when my money in my savings account accumulates, I use some portion of that money to make an investment. You need to save money but saving money alone will not minimize your financial risks or grow your wealth, you also need to invest your money. I have portfolios on stocks, crypto, and equity in businesses. I built all of these through saving, I first started saving, and then started investing. I don't invest everything I have saved. I always keep some funds in my savings accounts, this will allow me to manage life during financial difficulties. Some people say you can actually save 40-50 percent of your income.
Well, investing money is certainly better than saving money but before you can start investing you need to save money. How can you invest when you do not have any funds? How would you have funds, if you have not saved? Well, you sure can start buying crypto for $1 or invest in micro investment platform for as low as $5. But where will you reach with this kind of investment. Even with the current crypto market crash $1 will buy you just about 0.00005 BTC. With $5 you will not even buy one stock, you will be buying a fraction of stock. There is not much to gain with this kind of investment. Instead of investing negligible amount, you need to fist save money and when you have substantial amount, start investing. Open a saving account deposit your savings every month and withdraw one year later and invest the money. This is what I did and this is the best strategy you can apply for yourself.
Simple Budgeting Strategy to Build Saving
I have a simple budgeting rule. I use the rule of 50/30/20, where I spend 50 percent income on my essentials such as rent, food, fuel, bills, etc. I use 30 percent of my income for my wants such as buying new pair of sneakers or saving for a vacation or a new phone, etc. I save 20 percent of my income. I save it in a normal saving account and when the money accumulates, I move it to high-yield saving accounts such as fixed deposit bank accounts. I don't keep my entire money in my saving accounts, I also invest. Sometimes when the money I have for my wants becomes surplus, I also use that money for my investment. I don't have emergency funds, but I have my money in saving accounts, and in emergency situations, I use that money. For example, when I lost my job, I use my savings to pay bills.
You should be saving at least 10 percent of your income. If you are making $1000 per month, you should be saving at least $100 every month. However, if you can you should be saving more than 10 percent of your income. When you are saving money, you should keep your money in saving accounts where you get some interest on your deposit, by doing this you will also make additional money. You should also compound your interest. Compounding interest means you do not withdraw the interest you receive on your saving but convert your interest in your principal amount.
Saving Money in Banks
If you are saving money, you should always keep your savings in an interest-bearing account. Interest-bearing accounts are the bank accounts where you earn interest on your deposit. How much interest you can earn from these accounts depends on the type of account, the bank's policy, and your country's central bank's monetary policy. You earn higher interest in your fixed deposit bank account compared to normal savings. Some banks have accounts for special groups of people, such as women's savings, kid's saving, etc. and these accounts for special groups of people usually have higher interest. In our country we get 7 percent interest on normal savings.
Saving Money Through the Off-the-Grid Lifestyle
Off-the-grid lifestyle refers to a lifestyle that is independent of public utilities such as electricity, water supply, gas, etc. This lifestyle exercises minimalism and is not dependent on most modern amenities. People living off-the-grid try to grow their own food, use solar power, use natural sources of water, etc.
Living off the grid is one of the best ways to cut your living expenses. You grow your food, therefore, you save a lot of money on processed foods and junk foods. You use solar energy and natural water, therefore, you do not have to pay utility bills.
A lot of people are living in the cities because cities offer work opportunities, however, if you can work remotely you do not have to live in the city, in fact, you can live in the countryside and off-the-grid.
If you want a minimalist lifestyle, save money, live a debt-free life, enjoy a stress-free life, and live a healthy life, switch to remote working and an off-the-grid lifestyle.