Saving Strategies

Saving money is a time-tested strategy. Although there are many traditional strategies for saving money, newer approaches account for the financial circumstances of individual persons. While the traditional methods blandly suggest saving loose change in a jar or setting aside a specific amount from each paycheck, newer methods emphasize the notion of “paying yourself first”. What this implies is that one sets money aside for their own use before paying the bills or anyone else. It is thought that only then can one effectively grow their savings without wasting their efforts on self-discipline measures

Pay Yourself First

The Pay Yourself First method encourages one to set aside money, be it whole dollars or a percentage of one’s paycheque, and pay it to themselves. At first glance this method may appear counterintuitive, seeing as people exchange their labor for money to specifically pay the bills (and the people) necessary to enjoy life. However, when viewing savings strategies from the individual’s perspective and thinking in the opposite direction, it is revealed that one is not merely working to pay other people but is working to pay themselves; to sustain a lifestyle, home, and often a family. Under this light, paying oneself first takes precedence over bill payments which essentially earn money for someone else, while leaving the saver’s own needs by the wayside. What this means is that by paying oneself first, a person is taking care of themselves before moving on to other people’s needs. Logically, before one can take care of others needs, one must have the financial capacity to meet their own needs in order to even generate an income. Thus, one can set up their bank account to have funds automatically withdrawn to pay themselves, perhaps into an RRSP. Moreover, if one follows this method and is subsequently able to pay their expenses, then when continuing to automatically pay themselves first, over a career-span, they will have amassed some real savings (assuming they remain employed).

Plan Ahead

No solid money saving strategy can be implemented without first having a plan, or in other words, a “spending budget”. A spending plan requires that one figures out the balance between their income and their expenses. Once these values are established it is relatively easy for most people to determine where they can reduce expenses or increase their income in relation to the amount of money they are intending to save. Accordingly, this method requires identifying just what one is spending their money on. Once anything is identified it can then be worked with and seen in a different perspective. In a way, identifying exactly what one’s expenses are permits a degree of control over one’s spending, which can then be formulated into a spending plan or in other word, a budget.

Ways to Save

There are as many means to save income as there are methods of generating income. The most readily available means for saving are registered savings accounts. An individual can use one savings account or multiple savings accounts; both methods are merited given each individual’s personal financial circumstance. There are many different kinds of savings accounts tailored towards personal needs such as retirement, tax-free savings accounts, mutual funds, etc. Often savings accounts are free, and one can put money into the account(s) for the exact thing(s) they are saving for.

Though it is ill advised, money can be saved under one’s mattress or buried in one’s yard. Although being prone to unruly roommates and children, or being destroyed by the natural processes of nature, saving money in one’s home is a very basic and outdated means by which to amass savings. It is best advised that if one wants to keep their money as secure as possible then acquiring a safety deposit box at the local bank is slightly more effective, but not by much. Although saving one’s money in a safety deposit box ensures peace of mind, it does not generate interest and is benefiting no one.

Conclusion

In conclusion, saving money is not easy and it takes time, discipline, and most importantly…a plan. When one plans ahead and understands that the financial goals they have for the future are directly connected to how they sustain themselves today, then paying oneself first is not counterintuitive. In fact, it is the most logical course of action. At times the most direct route is not the most effective or successful. Thus, acting contrary to what is perceived as expected may help one fulfill their savings goals, and amass some serious wealth.