Simple Steps to Saving Money

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In my last post, I wrote about the importance of
saving money where I shared with you four Biblical principles that teach the value of saving money. Now I will write about the the how to saving money. I share some tips how to you can save money, and save money consistently :)

Much of what I write here are based on my personal money saving experiences. I find the how to saving money quite simple. If we just have to follow a few steps, we can begin to accumulate money in our bank account. I believe we all do save money at some point, but the big challenge always is how to save money consistently. Yes, the key to wealth creation is regular and consistent savings. Developing money saving habits are not easy because we, Filipinos, are generally spenders and not savers. For instance, our household savings rate was below 20%, one of the lowest in South East Asia. There are many other ways to save money, and if you do it consistently, you can accumulate savings for your protection against income shortfall in the future.

These are few simple steps you can use to save money and to develop your saving habits:

1. Be Clear About Your Savings Objectives

Before you begin, it is important that you are clear with your saving objectives. What is it you want to be saving for? Write your objectives down and based your savings plan on what's most important to you. The better you understand your saving money objectives, the more you will be committed to implementing and following it through. Here are some you might be planning to save money for:

• Retirement. This is one serious issue you need to think about and to be saving for while you are still actively working. This is part of being responsible. One way to do this is to contribute to your Government Service Insurance System (GSIS), if you are a government employee or open an account with Social Security System (SSS), if you are a private sector employee, business owner, self-employed or freelancer. I know the benefits you get from any of these social security programs are not much, but it can help. Another way to prepare for your retirement is opt for a life insurance policy. There are many types of life insurance products available in the market now that offer superior coverages for least amount of premiums. Some combine it with investments in mutual funds, others have endowment funds too. I'l write and recommend some of the best insurance companies and products in my future posts.
• Emergencies. You may also need to set aside money for emergencies. Anything can happen at any time, and if you do not have funds for emergencies, it can be too much of a headache for you. Some financial advisers I talked to suggest to set aside money for emergencies at least six times of your monthly income.
• Health. Another important item you should not miss is to save for health or medical needs. Getting sick and hospitalized is very expensive nowadays. The cost of hospitalization, medicines, laboratories and doctor's fees can really drain our money away. One option to ease your burden is to be a member of and contribute to our national health insurance program or PhilHealth. Whether you are formally employed or self-employed, you can contribute to PhilHealth and you and your family will be covered. PhilHealth benefits can really help a lot in times of medical emergencies. You can also supplement your PhilHealth coverage with private health insurance or HMO.       
• Play account. Of course, it is also important you save for leisure and relaxation.  Play account is the rich people way of saving for leisure. You are working so hard and you should reward yourself also. You should save money for holidays and vacations and others.

These are few examples you might need to be saving for. There are many more. For instance, if you are a parent, you need to save for your children's education. Young professionals need to save for their dream wedding, too :) and the list can go on.

2. Set Specific Goals

Now that you are clear about what you want to be saving for, next step is to set specific goals. Fix the amounts you wish to have and set the exact dates you want your goals achieved. For instance, if you want to have a holiday, ask yourself, when is it exactly you want to be able to enjoy your holiday? How much money do you need for the holiday to enjoy? You can set the amounts needed that are most realistic to you, and the dates that are most important and meaningful for you. You also need to prioritize your goals and think about what each of your goals will cost you. You might need to do some research to figure out how much money you will need, or you can seek out the help of other people. But please do not burden yourself with complicated calculations. Be simple as possible. What is important is that you are able to figure the estimated costs for each of your goals.

3. Developing a Budget  

According to Robert Kiyosaki, knowing how to budget our money is one of the important financial intelligences we have to master. How to save money is to develop a budget that incorporates savings into it. A budget, according to one definition is: a systematic plan for the expenditure of a fixed resource over a given period. We can use the budget to make saving money automatic by incorporating it in the plan. The best way to do that is to treat your regular savings as an expense in your budget. If you treat saving money as an expense say every month, then you will have to pay for it. You are paying yourself first. If you do it this way, chances are you can save money regularly. You have a choice to use your budget to create saving or not.  For instance, in my case, this is how I structure my budget plan: Total income from all sources less tithes (I believe in tithing so it's on top of my list), savings (broken down by type of savings) and living expenses. In this case, I pay myself first, then I work around the remaining money to develop my living expenses budget. I started doing this a long time ago, this has worked pretty well for me.

I agree saving money that way is not easy at the beginning. It's really a struggle and it takes a lot of discipline to sustain it. But if you stick to it long enough, you can develop in due time better money management skills and money saving habits as well.

If you have other ways of saving money, please feel free to share it here so that others can benefit as well from your experience. Your comments are definitely welcome :)