Compounding is the 8th wonder of the world. Even a small amount of money can give significant returns if saved and invested wisely. Despite this, people’s urge to splurge on unnecessary things supersedes everything, and ultimately, they fail to meet their financial goals. In his book, ‘The Psychology of Money,‘ Morgan Housel emphasizes how human psychology impacts the way one deals with money. You need to save money first, and saving money is a skill that most of us lack.
Here are some practical ways to save small amount of money regularly and develop a habit of saving.
1. Mindful Spending
When you know your budget and planned expenses, you become conscious of your spending. By listing down all the expenditures using a planner, you can track your budget, prioritize important expenses, and cut the superfluous ones. In simple words, if you can measure it, you can manage it.
Recommended reading: Take the Minimalism Challenge
2. Set a Goal
You are more motivated and self-driven when you have a goal in place. Having a financial goal, be it long-term or short-term, helps one stay more focused. Knowing your ‘why’ helps you to draw a line between what you need to buy and what is just nice to have.
3. Use Physical Cash
It is directly related to the psyche and the ‘pain of spending’. Spending a hundred bucks and a thousand bucks digitally feels the same. But spending the same amount in cash has different impacts. The latter one demands time and effort for counting and makes you more conscious of your money. However, it is not advised to spend through cash only as digital methods offer cashback, but pay in cash whenever possible to bring spending habits on track.
4. Right Instrument
Saving and investing together make a powerful weapon for long-term financial success. Make your money generates more money by investing wisely. Mutual funds, especially Systematic Investment Plans, are an excellent option to invest a small amount every month. They are safer and give a substantial income over time. Choose an automatic payment method for savings and investments to discipline your savings habits and ensure that you first save and then spend.
5. Stop Impulse Buying
If you have too many shopping apps on your phone, delete some of these apps. This will help in saving money by controlling impulsive purchases. Another effective hack to curb impulse buying is that if you like something, don’t buy it immediately. Wait for at least 24 hrs. The chances are that your temptation of buying will fade away.
Recommended reading: 5 Simple Ways To Stop Overspending
6. Ditch the Discounts
Missed the Black Friday sale? Worry not; Christmas and New Year’s offers will save you. In fact, if you check online shopping portals at any time during the year, you can always find some discounted products. Though you might sometimes save more during shopping festivals, they are usually nothing but an age-old gimmick to make customers buy products even if they don’t need them.
You don’t need to have a high income to save money. There’s a saying – a penny saved is a penny earned. Never underestimate the compounding power of making small savings each week.
Remember, in the long run, it won’t matter how much you earned. But how much you saved will make the real difference.
