It does not matter how much money you are making if you don’t have money saved in your account at the end of the month. Let us take the example of two friends Bob and Mike. Bob earns a monthly salary of ten thousand dollars while Mike earns a monthly salary of six thousand dollars. Bob spends nine thousand dollars in a month and saves one thousand dollars a month. Mike spends four thousand dollars a month and saves two thousand dollars a month. Who will be richer in the long run? Consider five years. After five years, Bob would have saved sixty thousand dollars while Mike would have saved one hundred twenty thousand dollars. Although the salary of Bob is much higher than the wages of Mike but in the long run, Mike is richer than Bob. So it turns out that it does not matter how much money you make, but it matters how much money you save.
The plan of saving money
Planning of doing something is very important before actually doing that thing. You should have a plan to save your money. If you don’t have any such plan yet, then you should first make it.
Have a calculated metric of saved money
In physics, there is an observation that that observation changes the outcome. Same goes with the psyche of saving money. If you calculate how much money you have saved and how much money you can save, this will have a psychological impact on your mind, and you will become thriftier and save more.
Try the cold turkey technique on spending money.
If you find yourself in the habit of spending money, then try the cold turkey technique. In this technique, you abruptly stop spending money altogether. This provides you an opportunity to save all the money that you are able to earn.
Live on the bare minimum.
Look at the equation of savings, which says income minus expenses equals savings. So if you wish to increase your savings, then one way to do this that you cut down your expenses. The expenses can be cut down by living on the bare minimum, which means that you spend money on what you eat and drink.
Set a realistic and definitive goal of saving money
People strive to achieve goals. If you set a goal, then you have an inclination towards achieving it. Take two considerations. One person says that he has to save money and the second one says that he has to save one thousand dollars. Decide for yourself who will save money. Obviously, the second one as he has set a realistic goal of saving money.
Make a secret savings account.
One of the ways of losing your savings is that any of your family members or friend asks you for money, and no matter how reluctant you are, you have to give them money as they know that you have savings piled up. To avoid such a situation, you have to save your money secretly and should not have to brag about your savings in friends and family circles.
Use the power of compounding interest on your savings.
Compounding interest in a savings account is a tool that passively grows your money over time. Your savings will be boosted if you take advantage of the compounding interest. The concept of compounding interest is very simple and easy to understand.