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They say it’s not about how much money you make, but how much money you keep. Saving is the earning of tomorrow, but very few people understand it.
We saw the importance of savings last year in 2020 when many people lost their only source of income due to Covid restrictions and had to survive on their savings.
Imagine having little to no savings in your bank account at such times and losing your job while having a family with children at home.
The importance of savings is immeasurable. It gives you a sense of security, a cushion to fall back on, and the ability to take risks with a free mind.
Moreover, saving money also allows you to invest and grow it. Without saving, you can’t invest. And without investing, you can’t grow.
Many people struggle with saving money because of bad spending habits, no budgeting, and sometimes simply because they don’t earn enough.
Jamila Souffrant was also one such person who couldn’t save money once. But then, she decided she doesn’t want to continue her corporate job, and decided to save enough money to retire early.
In the next two years, Jamila, a mom of three, successfully saved up $169k and retired at the age of 40. Today, she will let us know how to save money fast as a family.
How to Save Money Fast
Saving money is not a thing you do but a process you follow. You can’t save money in a few weeks or months because the process spans over years. So let’s divide the process into two parts and learn from the first step.
1. Where You Are and Where You Wanna Reach
To achieve anything or get anywhere in life, you first need to figure out where you currently stand and what is the destination, then only you can derive a path.
Don’t just think about your current situation and goals. Write everything down in terms of numbers. What is your exact income right now? What is the exact amount you want to save up so you can live according to your wish?
Numbers give you clarity. Also, imagining your goals and where you wanna reach helps you stay motivated to keep moving towards them.
For example, to convince her husband to get on board with her idea of saving, Jamila asked him to visualize what he would do if he could retire early as well. Visualizing helped him understand and follow the plan.
Visualize what you will do when you’ll have your desired amount saved in your bank account. Will you also retire early, will you start a new business, will you go on trips, will you relocate.
If these things excite you, you’re far more likely to stick to your savings plan and actually achieve the goal.
2. What’s the Path to Reach Your Goals
When you know the numbers and the exact amount you want to save or invest each month or each year, it’s not very difficult from there to figure out how to do it.
If your income is good and you have enough money left at the end of the month that you can meet your savings goal, then all you have to do is just save that amount.
If your current expenses eat up most of your income and what’s left at the end is not enough to meet your savings goal, then you need to distinguish between necessary spending and unnecessary spending.
That’s where budgeting comes into the picture. Most people can’t save enough not because they earn less, but they spend without a plan.
At the beginning of every month, consciously decide where each dollar should go ideally, and if you’re spending over and above the budget, note where the extra money is going.
You’ll notice in the very first month some of the things where you’re either overspending or unnecessarily spending. The next step is to cut the overspending and save that money.
If your income is not enough to even meet your necessities, then that’s a different problem altogether. In such a case, you shouldn’t be reading articles on how to save money but how to make more money.
Now, there’s a very fine line between living on a budget and living miserably. You shouldn’t ideally downgrade your current lifestyle drastically in order to save more.
Ask yourself what do you consider a good life right now and what you would consider a good life in the future.
An ideal savings plan will help you balance the two, meaning you won’t have to give up many things that you love now while still saving up for the future.
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How to Maximize Your Savings
To maximize your savings, you don’t need to downgrade your lifestyle completely, but giving up on some luxury and unnecessary things here and there might help.
For example, a lot of people own expensive cars whose maintenance costs thousands of dollars every year. Switching to a more sustainable and economical car will help save those thousands of dollars.
Similarly, many people like to go out every weekend, which is fine, but visiting expensive bars, clubs and restaurants every week could be eating up a nice amount of your monthly budget.
Switching to a less expensive place will not certainly downgrade your lifestyle but will still help you save up money that can be easily saved.
If you regularly budget and keep track of where your money is flowing, you’ll find plenty of these little things where money can be easily saved with little sacrifice.
Sacrificing on luxuries now doesn’t mean you will not get to enjoy them forever. It is just a matter of time until those luxuries stop hurting your budget.
Also, saving money is no more just about keeping the money in a piggy bank or your bank account. There’s more to savings than just keeping the money safe.
While saving, the most important thing to take care of is taxes. You don’t wanna pay taxes on the money you’re investing, neither do you want to save money after paying taxes on it.
The best way to maximize pre-tax savings is by maxing out your pre-tax retirement accounts. If you’re an employee, you might have access to either a 401k plan or a 403b plan along with an IRA. Try to max them out first before going any other path.
How to Save Money as a Family
The challenges of saving money are very different for those who have a family from those who are single.
A family increases your spending, responsibilities, and challenges by multiple folds. You can’t change things easily in your life, especially when you got children.
The most important thing to take care of while saving as a family is mutual understanding, especially between the couple because most of the sacrifices will be made by the couple, not by the children.
Couples need to, first of all, be comfortable and talk about finances freely. That is the only way they can budget properly and keep money flow in control.
Mutual understanding and cooperation is most important in deciding what you want to sacrifice on. Because one person might value something that the other can easily sacrifice.
Making decisions only after validating each other’s feelings and concerns is the key to save money fast as a family.
Also, letting your children know about the budget and finances is crucial. Whether you want to include them in your saving mission or not is completely your choice, but they should have an idea that there is a limited amount of money available.
Parents often have hard times explaining the concept of money to their children, but understanding money and how it works is also a crucial life skill that you have to teach them.