According to the 50-30-20 rule isn’t saving 50% a bit of a stretch?
It actually isn’t, especially if you are young and single. When you put a 'why' behind your goals, it is much easier to achieve your goals.
If you are reading this, chances are you want to know how to increase your pot of savings. It's simple. I will liken it to trying to lose weight.
To lose weight you have to either 1. increase your exercise or 2. reduce your caloric intake.
Similarly, to increase your pot of savings you have to 1. increase your savings and 2. decrease your expenditure. Sounds simple isn't it?
If it is that simple, no one will be struggling. In this article, I hope to equip you with the mechanics to increasing your savings
#1 Track your expenses
Have you ever wondered, "where did all my money go!?"
I guess we all have experienced this. To increase your pot of savings, you need to track your expenses diligently. How do you do that?
You can either write it down manually in a journal or use finance apps. One app that I personally like is the Seedly app. It is convenient and fast. When you start tracking, you will be able to point out what is causing you a lot of money.
Tracking will allow you to analyse your spending habits and show what you need to cut down on. For example, I did not know that I spend $350 on food alone! This was attributed to frequent trips to restaurants.
With this knowledge, I restricted myself to one visit per week. My spending on bills have declined drastically from then.
#2 Create a plan on how much to save by when
As the saying goes " If you fail to plan, you plan to fail." Creating a plan is paramount for you to succeed. And no, you cannot just copy someone else's plan.
Some want to achieve financial independence at an early age, some want to save up aggressively to purchase your first home, some may have debts that require you to clear, the list goes on.
You must have your own goal and reason to saving. With a clear purpose in mind saving is much easier.
After tracking your income and expenditure, keep the rest for savings. Do projections, how much savings will you reach by the end of the year? Plan out your expenses, how much do you want saved up and work backwards.
For example, for me to reach $50,000 net worth by the end of the year, I can only spend $14 per day. Your plan cannot be too unrealistic, such as living on $1 per day to hit your goal.
Planning does not stop writing down, rope in a friend or your significant other to hold you accountable. This is to prevent impulsive buys. Share your plans with one another. This will tie into next point, evaluate each other plans and find ways to cut expenditure.
#3 Create a challenge for yourself
If you are bent on increasing your pot of savings, create challenges for yourself.
Design one that suits your lifestyle, some ideas include
No shopping online for 1month. When you are able to accomplish this for one month, continue for another month. It will be tough to resist but it is possible.
I used to purchase at least one item online every month. But you as you know, it is impossible to just get that one item online as the web will tempt you into getting more items. By the time you check out, you have many items.
What I did to overcome that was to make purchases at brick and mortar stores. To my surprise, the prices are sometimes cheaper with certain sales going on. In addition, no shipping fees is slapped on to my purchases.
Another pro for purchasing offline is the limitation to carry many items. Hence, we are less likely to overbuy.
Some other challenges include "survival mode", buying things only necessary for survival. As humans, we only require oxygen, food, water and transportation. Besides that, keep your money in your wallet!
You can also try "No bubble tea for 30days challenge" or "No restaurant for 30days challenge"
#4 Research what you are buying and saving hacks
Always do your homework before making a purchase, especially for big ticket items. A dollar saved is a dollar earned.
As you track your expenses, figure out where you go often and if that place has any incentives programmes. For example, I find myself frequenting this restaurant called Akitmitsu. I realised that if join their FREE membership you get 10% cashback!
Besides membership programmes, here are some ways I researched and tried:
Ask friends or relatives to join a Spotify family subscription. My monthly bill went from $10 to $3! A 70% increase in savings
Linked my credit cards to shopback. Whenever you shop at partnered merchants, you get 10% cashback. For instance, Guardian. I now buy necessities such as shampoos from there now.
I carry such habits even to inexpensive places. For example, some coffeeshop work with Favepay, another cashback app. I realise I frequent a chicken rice store. With apps like Favepay I get to save 70cents to a dollar every visit. Albeit a small sum, it adds up over time.
Before making a big purchase, go onto different websites to compare the best prices, learn to negotiate.
These examples are based on personal experiences. The key point is figure out your spending behaviour, research on ways to either earn cashback or find an incentive program that rewards you.
#5 Increase your income
Thus far, I shared ways to decrease your expenditure.
But that is only half the equation. The other half to increasing your pot of savings is to increase your income.
While it is a good to lead a frugal lifestyle, it may get exhausting or restrictive. In order to maintain a decent lifestyle and still increase your savings, earning a higher income is crucial.
There are many ways to go about this, negotiating for a higher salary, working overtime and doing a side hustle.
Note that theres a difference between demanding and negotiating. Make sure to deliver value to your organisation or reaching a certain KPI before you ask for a pay raise.
Work overtime, or work part time on the weekends. Some ideas include driving grab, food delivery, start a side business. Personally, I teach tuition on the weekends.
Some other methods include saving up and investing in dividends stocks.
Warren Buffet once said "if you only have one income, you are only one step away from poverty."
Life is an effort, everyone has their struggles.
Dieting is hard, being overweight is hard. Saving up is hard, being poor is also hard.
To achieve your goals, being disciplined is key.
I hope you've learnt something and implement it in your life.