“I need a dollar, dollar. Dollar is what I need,” sings Aloe Blacc in his hit single I Need a Dollar.
We all need money. That’s why we bust our asses working countless hours in jobs we don’t particularly like. What we do with the money we earn determines what our future will look like. Saving is like the beam of a flashlight. It provides some direction for our lives. Developing the discipline to set aside some money from your paycheque each month is crucial for future planning. Financial freedom is possible. However, it requires discipline, hard work and the fortitude to keep on the right path despite the odds. Avoiding these 5 mistakes will help you save effectively.
Mistake #1: Dipping Into Your Savings
The point of saving is for you to have money for the future. It’s nonsensical to put money aside yet continuously dip back into that money each month. Some people put their savings in accounts from which they can’t withdraw money until a certain time has elapsed. I’m not one of those people. So, when unexpected expenses pop up, the first thing I do is head for the savings.
Right now I’m tempted to make a huge dive into my savings to buy things I need: clothes, a watch, and a phone since my current phone is dying slowly. Resisting this urge is a struggle. However, I know that I have to resist in order to gain the financial freedom I desire. My advice: put your savings in an account that you can’t touch. This guarantees no temptation. Leave your savings alone!
Mistake #2: Not Having a Goal
Saving becomes meaningless without a goal. There have been points where I’ve become so frustrated with life that I’ve questioned the purpose of saving. Questioning ultimately resulted in me depleting my savings without giving it a second thought. There are two reasons we should save:
- to invest
- to accomplish a major life goal
Solid investments require huge capital. The only way to get that capital is to save a portion of your salary and then find an investment instrument that will yield high returns. You’ll never earn that investment capital if you are nonchalant about saving.
My most immediate life goal is owning a car. I know that my reality dictates that I will have to get a loan to make this possible. However, borrowing less money from the bank always works to the borrower’s advantage. My aim is to save enough to at least cover 20% of the vehicle’s cost. I also need to have enough saved to cover insurance, an alarm system, and licensing. This goal makes me more determined to consistently save.
Mistake #3: Putting All Your Eggs in One Basket
I know people who have invested all their savings with one company only to see that company fall apart. It doesn’t matter how successful the company presently is. Don’t put all of your savings in one place. Save small portions with different institutions. This may minimize the returns you’re able to achieve. However, it’s better to be safe than sorry.
Mistake #4: Using High Risk Investments Exclusively
High risk instruments yield the greatest returns. However, they also yield the greatest losses. Speak with your financial adviser about how to strategically use high risk investments. The advice he or she gives can help you identify the percentage of your savings that can be used for high risk investments.
Mistake #5: Not Living Within Your Means
One of the biggest mistakes people make with their money is unnecessarily increasing their expenses. You have to learn to live within your salary. Your expenses should be less than 50% of your income. If it’s more, you have to find a way to cut some things off. Having a high level of expenses is a recipe for disaster. Dipping into your savings will become a necessity. So, list your current expenses and decide what you need to get rid of.
Everyone can save, even it’s just 10% of their salary. The point is to avoid making the mistakes highlighted in this article. Avoiding these mistakes will help you get a grip on your finances and move you one step closer towards your goals.
Christine is a content marketing professional. Through her company CEM Writing Services, she offers article writing, blog writing, website content writing, content management, and social media marketing services. Learn more by visiting cemwritingservices.com.