5 Tips to Saving Money Fast!

Saving is important along the financial freedom journey. A lot of people focus on high “savings rate” but the truth is that high “saving rate” is more critical to achieving financial freedom (check out the difference between “saving rate” and “savings rate” here published in the last newsletter).

• A saves RM1000 monthly at 1% interest per year for 20 years
• B puts his RM1000 at 15% rate per year but never put in more saving to his financial freedom account.

Who can achieve financial freedom earlier? The answer is obvious. Followings are the 5 tips to saving money fast!

Tips # 1: Have a budget: the number 1 reason people overspent is because they have no clear idea of what to do with their money. If you wish to save, you should know how much to spend on each category, i.e. necessities, leisure, personal development, charity and saving. In general, one should save at least 20% of his income and spend not more than 80%, 50% for the necessities, 10% for personal development, 10% for charity and 10% for leisure.

Tips # 2: Have daily expenses tracking. What gets measured gets improved. To be able to save, you must know what you are spending on. You will be shocked when you start tracking your expenses as you will realize there are many items that you don’t even realize you spent so much money on. With the daily expenses tracking, you can then work out a plan to cut down expenses easily through cutting the highest 3 expense items.

Tips # 3: Save before you spend. You should set aside your desired saving amount before spending it when your income reaches your bank account. Do an automatic transfer to the bank account you seldom use to safeguard your saving before you start spending every month.

Tips # 4: Avoid or reduce the credit card usage. Spending on credit card is like spending your future money. It is a great pleasure to spend using credit card and hence deplete your saving easily if you do not control consciously. If you cannot pay the credit card payment on time, avoid using it. Use cash to pay instead of credit card. You will be left with no choice but to spend only on whatever you have instead of whatever you will have.

Tips # 5: Separate your needs and wants. Needs includes basic food, transport, utility, housing, etc. to survive. Wants are entertainment, eating out, luxurious items, gadgets for lifestyle. Fix the budget for “want” items. Do not spend over the set budget for “want” items. Wants can provide enjoyment but might be determent to saving. So, balance is the key!

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