If you are here reading this article, “9 Tips on how to start saving for the future,” then something must have caught your eye in the last few days. Something must be bothering you that is keeping you awake at night, or someone must have told you something. What happened? Did you see a very close childhood friend become homeless? Or did you see a young father or mother struggling to pay for their child’s medical costs? Or did you see your best friend of the same age leaving for an expensive vacation or purchasing a very expensive car?
You might be here for a number of different reasons. But the important thing is that you are here, which means that your brain cells have started firing. All you are thinking about is your future, and nothing else. You have stopped drinking. You stopped playing video games for 12 hours a day. You have stopped wasting time.
Now, you may be in your 20s or even your 40s. If you’re in your 20s or 30s and considering securing your financial future, congratulations! You’ve joined the elite group of individuals worldwide who, in their 20s or 30s, have already started contemplating and strategizing their next steps to achieve financial independence.
And for those in their 40s and above, I will only quote the famous line that says, “Age is only a number.” Of course, you are never too old to do or achieve anything in life. But financially speaking, your ability to secure your future depends a lot on that number. The earlier you start planning, the more benefits, flexibility, and lower premiums you can enjoy. Conversely, the older you start planning, the wiser and more experienced you are, but your premiums and co-pays may also be higher. So, age is important, but it is not a mandatory financial requirement to build a self-sufficient and secure future.
Additionally, you may possess a deep understanding of the market, economy, stocks, bonds, various savings and investment instruments, and all the associated financial loopholes and jargon, or you may have no knowledge at all. I’m not sure if this information is helpful, but I come from the latter group. All I knew was that if I earn, then I have to pay taxes, and that’s it. I literally had no idea how to prepare financially—at what age to begin, what investments I needed to make, or where I needed to save. It was like a dark pit, and I had no flashlight. I therefore chose to ignore what I didn’t understand. This was precisely where I made my first mistake. I was 19 at the time. For the next 16 years, I struggled to earn money, spending almost all of it and saving very little. I had no assets or security. Fortunately, I soon realized the danger that I was in, made all the necessary changes and improvements, and got my life up and running. I am 40 now, and I no longer wake up in the middle of the night anymore.
Now, I would like you to know that in this article, Tips on how to start saving for the future, I am not going to educate you on where or how to invest or save, or what the rates of interest are going to be like. If that is what you are looking for, then you should stop reading now. However, I would like to share with you all the opportunities I’ve missed in the past, which have significantly impacted my financial health in the present and ultimately delayed my profits and returns for the future. These are opportunities that you can consider as a pre-assessment step before you eventually start to save and invest. This preliminary stage of inspection will enable you to avoid mistakes and make informed decisions to ensure the financial future of your family and yourself.
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I will now present the points that I believe represent the appropriate method to proceed. You can, however, take a different approach, but the objective should be the same. Most of these points represent opportunities that I missed because I lacked the initiative to act when I was younger.
Start earning
First and foremost, saving money doesn’t mean anything if you don’t have any money to begin with. Therefore, the first step is to start earning money, no matter what. It can be a job, a business, or an income from social media.
Avoid distractions
Financial planning offers a structured and methodical approach to helping you achieve your goals while minimizing unexpected setbacks and surprises. However, developing the practice of diligently managing your finances in a world full of distractions can be quite challenging, considering you now have money to spend. All your life, you wanted to buy so many things and do so much more.
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It is therefore important to acknowledge the reality of limited funds among your infinite cravings so that you can avoid unnecessary and luxury purchases, especially if you are surviving from paycheck to paycheck. Attending late-night parties, gambling, drinking, and buying materialistic things that you might not need for the time being are some of the most attractive sinkholes that are designed to drain your hard-earned money. Spending money can become an invisible addiction, which you may not realize until years later. Therefore, it’s crucial to resist external influences and hold on to the money that you have made.
After covering all essential expenses, you can allocate a portion of the funds for recreational activities and other interests. This method of rational thinking and planning will empower you to better manage your tendencies toward unnecessary spending.
Establish financial objectives
Obviously, we all work to save for the future. Therefore, setting financial goals in advance gives you something to look forward to. But getting there will require some intelligent financial planning. The 50-30-20 rule is relevant in this situation where you’re allocating 50% of your money towards necessities, 30% towards desires, and 20% towards savings. This ratio may vary for some people, and it was extremely aggressive in my case. I started saving 60% of what I made, spent 30% on necessities, and 10% on wants and desires. I was 36 years old at the moment, and time was a luxury I did not have. Establishing a financial goal in advance will enable you to achieve or build something for the future.
Create a master sheet to track all your money
This may sound very basic, but it is highly efficient. Such a sheet, if properly maintained, will provide you with an eagle-eyed view of your monthly expenses and savings. Prior to preparing this sheet, I felt extremely disoriented and stressed about my money’s whereabouts. This simple way to track my monthly expenses gave me detailed insight and confidence to build ahead. Overspending in everyday life is one of the most important factors that prevents an individual from properly planning for the future.
Study, understand, learn and remember
Financial planning is an ongoing process rather than a fixed endpoint. You should regularly feed this process with information on the latest market trends, news, and updates. If you are new to investing and saving, it is important to gain knowledge about the most effective strategies that can also provide tax benefits. Staying up-to-date with financial news and relevant social media posts can provide valuable information and assist in planning for a well-rounded future.
Stay consistent in paying off your debt
Being in debt at a young age is not really a very good idea. During this period of your life, you do not have the required knowledge or experience to work that debt to your advantage. Chances are that your debt will grow, and you will most likely spend the majority of your time in clearing your debt with no end in sight. Furthermore, if you lose a job or have difficulty earning and retaining money, your debt situation will go from bad to worse.
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Credit card debt, one of the most risky instruments for falling into debt, is considered a major factor that hinders an individual’s progress and growth in the early stages of their adult life. Many people see credit cards as an unlimited source of money that provides them with a false sense of freedom. Such individuals, who are present in vast numbers worldwide, fail to complete higher studies, work multiple jobs to survive, engage in bad habits, use the credit card, fall in debt, fail to pay off the debt within the stipulated time frame, incur late fee payments and other penalty charges, use the credit card again, fall back in debt again, and this never-ending cycle continues. And then you wake up one day, look yourself in the mirror, and realize that you are in your mid-40s and that life has passed you by.
Here, I am solely referring to your credit card debt, without considering other financial obligations such as housing loans, personal loans, car loans, or business loans that could further amplify your suffering. Moreover, personal, legal, and medical issues may aggravate your financial crisis. So, you need to ask yourself, Am I going to live my life with wings on my back or am I going to live my life with chains around my neck?
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However, being in debt is not always a negative thing if it has the potential to grow your overall wealth or dramatically improve your quality of life. For instance, a student loan is useful if it facilitates the development of your academic activities. In contrast, if you have borrowed money to buy a product that is unsellable, has no value, and does not generate any return, then it is considered a bad debt, and these are the types of debt you need to be cautious about. In the end, it doesn’t matter what type of debt you have, whether good or bad; failure to pay off a debt is exactly that moment in life when things begin to go from bad to worse.
But if you can be disciplined enough to restrict your credit card use to what you need, and if you are punctual enough to pay off that credit card debt by the due date, then you will be fine. You just need to be cautious when using your credit card and consistent in paying off the debt.
Start a side hustle
An extra source of income beside your primary job will provide you with psychological sanity and financial security. If, by any chance, you lose your primary job, then you will have that extra source of cash to fall back on. Furthermore, if everything continues to go well, that extra money will help you clear your outstanding debt and improve your financial portfolio. But starting a side hustle after a 9-5 job or after multiple shifts of hard labor is a challenging endeavor that requires a significant amount of effort. You will not see the desired returns overnight, but only after consistently investing time and patience.
Be wise and prudent in managing the excess cash
To put it another way, you shouldn’t start spending the extra money that you just made. Make an effort to save it. While you may satisfy some of your innate cravings, I advise against spending all of them. You have put in a lot of effort to get to this point, and if you fail to protect this additional income, it would be similar to losing a championship final in the last minute of the match. If something like that occurs, you might have to begin the process all over again. You are nearly there—the point in your life when you are about to make your first significant investment, which will set you up for the future.
Finally it is time to invest
This single point has the potential to produce an additional three thousand-word article. Therefore, in order to simplify the process, I will provide a list of some of the most prominent yet critical investment opportunities that can guarantee the future of you and your family. Please note that the terminology for these investments may vary from country to country, but the opportunities to invest should be similar.
Health Insurance- Health insurance allows a person to protect themselves financially from the high cost of medical care and surgical expenses. It pays the insured person’s doctor or hospital directly, or reimburses them for medical bills.
Term Insurance or Death Insurance- Term insurance, often called death insurance, pays out a predetermined sum of money to a designated beneficiary in the event of the policyholder’s untimely demise. It provides financial security for your loved ones at a reduced cost while ensuring a large payout.
Endowment Plans- An endowment plan is a type of life insurance policy that offers both financial growth and life coverage. It provides a low-risk savings option for future financial needs such as retirement planning, acquiring a house, or supporting a child’s education. The policy predetermines the returns at the time of acquisition. In simple terms, the beneficiary will receive a substantial amount when the policyholder dies unexpectedly or when the plan reaches maturity or completion.
Mutual Funds- A mutual fund is a collective investment vehicle that combines the money of numerous investors and invests it in a diversified portfolio of assets such as equities, gold, stocks, debt, bonds, hybrid funds, or government securities. Its main goal is to provide lucrative returns for investors. Mutual funds, under the supervision of an experienced fund manager, provide convenient access, versatility, and easy exits, thereby eliminating the financial management risk for individual investors.
Other than the above, you can also invest separately in equity, real estate, the stock market, gold, bonds, and much more. There are hundreds, if not thousands, of avenues out there if you want to invest and secure your future. You can also start a social media channel to upload daily videos, or start a blog and begin writing, which will generate income in the near future. Any investment opportunity is like planting a seed and nurturing it daily with plenty of water and sunlight to see it grow and deliver. Financial planning is a long road, with occasional bumps along the way. Navigation through such terrain requires hard work and courage. But most important of all, what you need to invest is time and patience. In the end, you will eventually have your own tree from that seed, and you will spend your retirement with your large family watching the sunset on a beach in Tahiti. I promise!
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