There are many tried and true ways of saving money each month. Every day, put all of your loose change into a jar. Every once in a while, deposit the money in your savings account. In time, the money will grow into a little nest egg.
Try to set aside a certain amount of money each month or each paycheque for your savings. People have been doing this for years, but it takes discipline.
Pay yourself first
One of the best saving strategies is to pay yourself first. What this means is that you designate a certain amount of your paycheque as your pay (how novel) and you pay that money to yourself before you pay your bills or anyone else. This amount can be N2,500, N10,000 or maybe 10 percent of your paycheque. It can be any amount that you decide. The important part is that you pay yourself first rather than last. Most people pay all of the bills first and then save anything that might be left over. For most people, that method of saving does not really work because nothing is left over to save.
If you pay yourself first, then money will get saved because paying yourself is now your first priority. The nice thing about this method is if your budget is a little tight, it forces you to make adjustments elsewhere and your savings continue to grow.
Paying yourself first also makes sense. Why are you going to work every day anyway? To earn money for someone else? No way. You go to work to earn money for you and your family. That is why you should pay yourself first—to make sure that your first priority is taken care of: you. It is not likely that anyone else is going to take care of you because they assume that you are taking care of yourself.
Pay yourself automatically
When you pay yourself first, you should set up an automatic way of doing this so that you don’t even have to think about it—it just happens. You can get your employer to deduct a certain amount and put it in your Retirement Savings Account or you can set up automatic transfers with your bank (either online or at your local branch).
Most people who use this method find that they very quickly get used to living on a little less and soon they don’t miss the amount that they are paying themselves in their savings account. When you almost forget about automatic savings and let them grow, amazing things happen—automatically. Automatically, saving N25 a week turns into N1,300 a year. Now if someone did this over a lifetime, they would get some fantastic results—automatically. If someone automatically saved N100 from every paycheque (bi-weekly) from when they were 25 until they were 65, they would end up with almost N415,000 if they only received a six percent rate of interest. Of course, someone could afford to save more once they got their house paid off. So their final amount could be much higher. Hopefully, you can see how easy it can be to accomplish big things with just a simple automatic setup where you pay yourself first.
Another amazing thing about using automatic deductions or transfers to pay yourself first is that you can use it to become a millionaire—automatically.
This may sound crazy, but it actually works. If someone automatically had N20 transferred from each of their bi-weekly paycheques into their investment account from when they were 25 until they were 65, they would end up with over N10,000,000 if they averaged a seven percent rate of return on their investments. So a normal person can become a millionaire automatically without winning the lottery.
This plan would require a little more sacrifice than most people are willing to make in their twenties, but it is entirely possible. Now you know how to become a millionaire, if only you were 25 again.
The very best method of saving money is to create a spending plan or a budget (learn how to make a budget). With a budget, you figure out what your income is and what your expenses are. Once you know these two things, you can look for ways to reduce your expenses or increase your income to allocate an amount of money that you can afford to save. This is how the world’s largest corporations do it and this is how most of the world’s successful business people do it. This method takes a little bit of work at the beginning and a check-up every year or two, but it works.
The secret to this method (if you want to call it that) is to identify what you are spending money on so that you can begin to plan your spending. Once you begin to plan your spending, you will gain control over it and you will be able to plan to spend money on your savings. In other words, you will plan to put money into your savings account.
Many people don’t like to plan their spending because it involves a little bit of work (once a year). No one is saying that success will come easily, but this little bit of work will pay off big time in many areas of your finances. We dare you to try it – what have you got to lose?