The Ultimate Beginner’s Guide to Saving

Without a clear guide, saving money as a beginner may not be an easy task. Read more to learn on the Ultimate Beginner’s Guide to Saving.

Saving money has been described as the foundation of all financial success, even though sometimes the hardest thing is getting started.

By following the beginner’s guide to saving, you can develop a simple and realistic strategy, so that you can save for all your short- and long-term goals.

Why save?

Saving money is one of the essential aspects of building wealth and having a secure financial future. Saving money in Nigeria not only gives you a way out of the uncertainties of life but also provides you with an opportunity to enjoy a quality life.

Putting aside a sum of money in a systematic manner can help you steer out of many hurdles and obstacles in life. It can support you in your hour of need and ensure that your family has something to fall back on in case of an unfortunate event.

There are many reasons to save and several ways to save with ease. Some of the reasons why saving money are important include;

• Peace of mind

Knowing that you have a certain amount accumulated for times of your need, gives you peace of mind. You can lead a stress-free life with the knowledge that you will not have to struggle if things take an unexpected route.

Your savings can be the answer to a number of your goals. You can buy a house, accumulate funds for your retirement, or purchase a vehicle.

• Guarantees children’s education

With a considerable amount of savings, you can fuel your children’s dreams and pay for the best schools and colleges across the world.

• Short-term goals

Savings are not just aimed at the long term. You can also benefit from savings in the short term. A lot of people save for a few months and then travel, go for training, or something of that nature.

• Security

In case of an unfortunate event, having a reasonable amount stowed away can be your saving grace. By saving in a disciplined manner, you can make sure that your family is well-provided for in times of emergencies.

In unfortunate times, your savings can act as a cushion for your loved ones and help them overcome any financial difficulty.

Saving vs. Investing

Saving money has to do with putting money aside gradually, typically into a bank account or, these days, in a savings app. People generally save for a particular goal, like paying for a car, a down payment on a house, or any emergencies that might come up.

Investing, on the other hand, involves using some of your money with the aim of helping to make it grow by buying assets that might increase in value, such as stocks, property, or shares in a mutual fund.

Before you start investing, ensure that you’ve built your emergency savings and paid off any outstanding high-interest debt.

How much money you should be saving?

One guide to saving your money as a beginner is that at least 20% of your income should go towards savings.

Another 50% should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.

If you want to optimize your savings, run through the exercise described above.

The Ultimate Beginners guide to saving money

If you are new to savings or find it difficult to stick to your objective of saving, then you can try the following steps.

1. Pay yourself first

It may seem unrealistic to talk about paying yourself first when you’re faced with so many other financial obligations. Yet, while it’s critical to pay all your bills on time, planning for your future can’t always take the back seat.

According to financial powerhouse, Wells Fargo, if you make a habit of depositing or moving money into your savings account every time you are paid, you may be less likely to spend it on your everyday expenses.

You are important in this journey so make sure to pay yourself before you do any other spending. In other words, you are prioritizing your long-term financial well-being.

2. Track your expenses

If you find it difficult to save regularly, try to record and keep a track of your monthly expenditure. This will offer you a clear picture of where you spend. You can then identify the things that are not important and aim at saving more by avoiding those purchases.

3. Create a savings budget

It helps to devise a budget for each month. You can create a plan at the beginning of the month to target savings and set limits for spending. This lets you focus on what is important, reduces the chances of overspending, and lets you save as planned.

4. Invest in long-term financial tools

When you save, it is also important to see your savings grow with time. Investing your money in a long-term investment plan can have many additional benefits.

These plans offer a lucrative rate of interest that lets your money retain its value and beat inflation.

5. Cut spending

If you can’t save as much as you’d like, it might be time to cut back on expenses. Identify nonessentials, such as entertainment and dining out, that you can spend less on. Look for ways to save on your fixed monthly expenses, such as your car insurance or cell phone plan, as well. Other ideas for trimming everyday expenses include:

6. Review recurring charges

Yes, you may like to ‘Netflix and Chill’ but how many of these subscriptions impact your monthly expenditure? If you are intentional about saving, you should cancel subscriptions and memberships you don’t use, especially if they renew automatically.

7. Eating out vs. cooking at home

Still, on cutting down on your monthly expenditure, some habits ‘eat’ into your ability to save. Figuratively. Plan to eat most of your meals at home, and research local restaurant deals for nights that you want to treat yourself.

8. Pause before you buy

Saving and impulse buying do not go together. When tempted by a nonessential purchase, wait a few days. You may realize the item was something you wanted rather than needed—and you can develop a plan to save for it.

9. Set savings goals

One of the best ways to save money is to set a goal. Start by thinking about what you might want to save for, both in the short term and the long term.

It could be anything from buying a car to paying your next rent. Estimate how much money you’ll need and how long it might take you to save it.

Quick tip to guide your saving journey

1. Start small

As a beginner, before you launch into that big money target, set a small, achievable short-term goal. It could be for something that’s fun and goes beyond your monthly budget, such as a new smartphone or holiday gift.

Reaching smaller goals and enjoying the reward you’ve saved for can give you a psychological boost, making the payoff of saving more immediate and reinforcing the habit.

2. Prioritise

After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings. For example, if you know you’re going to need to replace your car in the near future, you could start putting away money for one now.

But be sure to remember long-term goals. It’s important that planning for retirement doesn’t take a back seat to shorter-term needs. Learning how to prioritise your savings goals can give you a clear idea of how to allocate your savings.

3. Pick the right tools

There are many savings and investment accounts suitable for short- and long-term goals. And you don’t have to pick just one.

Look carefully at all the options and consider balance minimums, fees, interest rates, risk, and how soon you’ll need the money so you can choose the mix that will help you best save for your goals.

4. Automate the process

Almost all banks and money-saving apps offer automated transfers between your checking and savings accounts.

You can choose when, how much and where to transfer money or even split your direct deposit so that a portion of every paycheck goes directly into your savings account.