Starting saving is a difficult but very profitable step. Setting aside designated amounts for specific goals will help you control the financial chaos and make the most of the money that comes into your wallet.
Saving is associated with mortification and sacrifice. It’s really about taking an honest look at your situation and taking control of what happens to your paycheck.
In this article, we want to help you take the first two steps: to make you reflect on your perception of saving and to prepare you to create your own plan for accumulating funds for the near and distant future.
Ready?
Why don’t we save?
We usually associate saving with the great difficulty of denying ourselves something, giving up pleasures, or tightening our belts. This is not a satisfying prospect, and it makes taking action very difficult. Ultimately, we all want to be happy and want to enjoy life.
Another common reason for not saving is the slogan “I don’t have anything to save.” If I spend everything I earn on living, what should I put in the piggy bank? This cause can be difficult to overcome at first, but in reality it is often fictitious. When you carefully analyze your situation, it may turn out that you have enough money in your pocket to not only survive until the first birthday, but also to start planning your financial future.
We live in an “instant” reality. Everything is available right away, so it is often difficult for us to wait for positive effects. Saving is a process that requires at least several months or years before the expected results appear. And despite the vision of a very positive end, it is often difficult for us to persevere.
In the age of the Internet, we are often put to the test. Well-prepared and personalized ads effectively extract money from your wallet. Additionally, we pass roadside banners, colorful shop windows and TV spots. In total, we see about several thousand of them every day (and these are data from 15 years ago!*). It’s hard to resist all this. If there are so many adversities, why is it worth making the effort to save at all?
What benefits does saving give us?
Contrary to appearances, systematic saving is not difficult, and the benefits are many. The first most important advantage of saving is security for the future. You can take care of your family’s fate and prepare for what life will bring. With savings, you won’t be afraid of emergencies or expensive repairs. You will prepare appropriate amounts for the start of adulthood for your children and take care of your own old age. It will also be easier for you to make decisions, e.g. about changing a job you don’t like or starting your own business.
It helps to raise the standard of living here and now. A shocking statement? If you take the matter seriously, by preparing a systematic savings plan, you will, among others: cut out unnecessary expenses and increased revenues. This will make you realize how much money you have and help you keep more for yourself.
Having a plan will make your dreams come true faster. Saving will help you, first of all, obtain the funds to implement them. Secondly, you will be able to predict when it will happen. This will increase your motivation, which will help you achieve your goal and increase your joy in life.
You have a good chance of becoming a grateful minimalist! This is a side effect of avoiding unnecessary expenses. You will have fewer things and an uncluttered space around. Thanks to this, you will learn to appreciate what you have. Isn’t that a good perspective?
You will be rich! You may not have millions in your account, but a small amount in your savings account will put you a step further than almost half of your compatriots! Additionally, by limiting your expenses on unnecessary things, you will be able to afford what you actually need, rather without unnecessary effort.
Convinced? It’s time to take action!
How to save? Step by step plan
A systematic savings plan takes some work and updating from time to time. It all starts with well-defined goals and planning subsequent (and specific) steps to achieve them.
1. Set goals
This is a key element of all planning! The success of the entire plan largely depends on well-defined goals. To get the most out of saving, we have divided our goals into three groups:
- Large annual expenses – these are matters that require medium amounts that need to be set aside for a short period of time (several months). What will it be? All the big expenses you have to pay during the year, e.g. car insurance, vacation money, property taxes. Anything throughout the year that requires you to spend more money “at once.” You will benefit from these savings on an ongoing basis when the time comes. It is worth keeping them in a savings account to which you will have quick access.
- Short-term goals – these are goals that require larger amounts of money, but you have more time to put them aside (several years). These are much bigger goals than in the previous point. If you are planning to renovate your apartment, buy a new car or more expensive equipment, this is your goal.
- Long-term goals – require collecting a large amount of money over a long period of time (several years). This group includes all long-term future goals – money for retirement or an apartment that you would like to give to your child.
This information will help you prepare a detailed plan that you will follow over the coming months. Speaking of which, it’s high time to prepare a household budget to turn your plans into reality.
2. Prepare a household budget
Preparing a home budget is an essential element of a savings plan. Now that we know WHAT we want to achieve, it’s time to determine HOW we will do it. And this is what the budget determines, i.e. planning expenses for the next month.
This is spending money on paper before it physically hits your account. This means you won’t be surprised by any bills and (most likely) won’t be distracted by any advertising.
How to prepare a home budget?
- Add up your monthly income. Take into account the previous month’s amounts. If you’re expecting a bonus or raise, don’t include it! In fact, you are not 100% sure that you will receive this money. And the worst thing you can do is spend money that you don’t have in your account. Plan their development separately. Then you will be sure that when they appear, they will not disappear quickly, and when they do not occur, you will survive the month without financial complications.
- Add up your basic expenses. Bills, loan installments, food, cleaning and hygiene products, budget for pleasures. This group also includes monthly “installments” of savings for large annual expenses. Subtract this amount from the total from the first point.
- The rest = savings and other expenses. What’s left is your savings fund.
What if the amount in point 3 is not enough to start saving for all your goals?
You can do two things:
- Review your expenses carefully again. Maybe something can be eliminated?
- Start looking for an additional source of income.
Don’t worry if, after the first month with the budget, you haven’t managed to allocate the money as planned. Calmly analyze the situation and make changes to your budget or your behavior and habits. Saving and making changes is a process, give yourself time and act.
3. Check your expenses
A candy bar during a break at work, coffee from a vending machine, or chocolate to improve your mood. Sounds dangerous? For your wallet, yes!
The stage of “sealing” expenses is important in saving. That’s why it’s worth writing them down and tracking them, because an innocent PLN 2 candy bar will result in a leakage of PLN 40 per month during the break. The amount spent on this snack per year is almost PLN 500!
So carefully analyze how you spend your money. Above all, stick to the budget you created and verify whether what you currently want to buy is in line with your plan.
Attention! This doesn’t mean you have to cut out the fun stuff to zero now. Plan a specific amount in your budget each month that you can allocate for such purposes. Saving does not equal mortification! Take care of your needs and spend your money wisely(!). And if something doesn’t work out, draw conclusions and try again in a different way.
Look for ways to buy cheaper and find inspiration on how to avoid unwanted expenses. You will find a lot of information about this on the Internet.
4. Pay off your debts
Debt is one of the biggest eaters of your money. If you have any consumer loans, try to pay them off before you start saving. Also, throw away all credit cards from your wallet that may tempt you to live on borrowed money.
Why is it important to get rid of debts?
Because banks and lenders use your money instead of you. Even though you buy things, you still give your money to others. These several hundred zlotys in installments for a TV set could be added to your holiday budget or put into a savings account to finance better education for your children in the future. Isn’t it better to leave the money for yourself?
Take a close look at ALL your debts and develop a repayment plan. You can start with the smallest amounts or with the debts that have the highest interest rate. Adapt the entire strategy to your situation and possibilities.
Thanks to this, in addition to extra money, you also gain peace of mind. In a difficult situation (e.g. long illness, loss of job), you do not have to pay back money, increase interest and arrears. You don’t have to worry about settling your debts. With a calm head, you can focus on yourself and getting through difficult circumstances.
5. Find a way to increase your income
This step is often omitted in saving plans, but it is one of the most effective and reliable ways to increase savings. Usually, those who start their adventure with finance, after stabilizing the situation, immediately turn to investments. Often without proper knowledge, which may result in losses rather than profits.
How to look for additional sources of money?
The first way is to invest in yourself and your skills. Thanks to this, by developing and working for the benefit of the company, you can get a raise or find a better-paid job. You can also use the same skills after hours to advise others or create an online course. And this is the second way – finding an additional job. It does not necessarily have to be related to your education and professional profile. You can use your passions and other skills to earn extra money.
6. Prepare to invest
The investment market is quite wide: bonds, investment funds, raw materials, real estate, cryptocurrencies, etc. Each of these forms offers a different rate of return and is associated with a specific risk. To maximize your return and lower your risk, it’s important to prepare well.
The basis for good investment decisions regardless of the type of asset is knowledge. Therefore, when you start accumulating capital, at the same time start collecting information about the form of investing you have chosen. This will help you reduce the risk of losing capital, control your emotions more easily and make wiser investment decisions.
7. Use your money
Don’t be afraid to use your accumulated funds! Use them according to your budget and plan. Remember that saving is not just about saving. You collect specific amounts to spend them in a specific way and at a specific time, and you allocate some of them to securing the current situation.
As you’ve read before, include a portion in your budget for fun activities. You don’t want to be “poor” and suffer, you just want to use your money wisely. And small pleasures, within common sense, are an important aspect of self-care.
The basis for good investment decisions regardless of the type of asset is knowledge. Therefore, when you start accumulating capital, at the same time start collecting information about the form of investing you have chosen. This will help you reduce the risk of losing capital, control your emotions more easily and make wiser investment decisions.
Where to put your savings?
You can store and invest the collected funds in various ways. There are many options: from a bank account to deposits and bonds. You can also use the proverbial “sock”. Which one is the best?
Piggy bank
This is a good option for storing smaller amounts that will be needed in the short term. This way you can raise money for large annual expenses or “small” dreams (e.g. money for workshops, books, etc.).
The advantage is simplicity and accessibility. The disadvantage is… availability. It’s easier to take money out of a piggy bank (unless you buy one with a single-use option). The money won’t “work” either. You will have as much as you put aside.
Deposit or savings account
You can use a bank to hold your money. In addition to the standard account, you can deposit it into a deposit or savings account.
The interest rate is usually not impressive, but your money is not sitting idle. In this form, you get rich on the interest that the bank pays you. This is a good option for keeping money for long-term goals or when you use cash less.
Treasury bonds
Treasury bonds are one of the main alternatives to deposits. They usually allow you to earn more than in the case of simple banking products, and at the same time they are still in a relatively low risk group compared to, for example, shares. Similarly to a deposit, you freeze your money for a specified period of time and earn interest or the difference in the redemption price.
This is a good way to save for long-term goals. It is also an opportunity to practice investing in very low-risk products.
IKE/IKZE retirement account
This is a special case of saving, reserved only for money that you want to save for yourself in the future. You can open a retirement savings account by signing an agreement with an appropriate institution (bank, insurance company, brokerage house, pension or investment fund) that will invest your funds (with a guarantee of security).
The advantage of this way of keeping money is the fact that savings from a retirement account are exempt from Belka tax! The disadvantage (or maybe even the advantage) is that you will be able to use the money without losses only after the age of 60. The offer also has a limit on the amount of deposits. Annually, you cannot save more than three times the projected average monthly gross salary in the economy.
IKZE works on a very similar principle. Here, the deposit limit is slightly smaller and the withdrawal conditions are slightly worse, but you can deduct the amount deposited in IKZE from tax when settling your personal income tax.
Create your savings plan now!
The sooner you start, the greater your chance of success. If you start saving at the age of 25, at least PLN 100 a month, by the age of 65 you will have PLN 48,000. Assuming that you will be able to enjoy your life for another 20 years, you will gain + PLN 200 to your pension. And that’s only PLN 100 deposited into the account!
Do you want to have more now and in the future? Go back to point one in the article and start by setting savings goals. I’m creating my savings plan!
And if you want to practice saving and start preparing for investing, check out Cashplay – a financial reality simulator. Register here!
Image sources:
- Image by jcomp on Freepik
- Image by jcomp on Freepik
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- Image by pressfoto on Freepik
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