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Saving Money - The Magic 20 Percent
By: Emmanuel Mendonca
Saving money is not easy and is made more difficult if you have a short-term
outlook regarding your personal finances. If, like many people, you are living
from one pay cheque to the next, it is difficult to put some money aside for a
rainy day or for a summer holiday. But what if you were to change your financial
outlook into a medium to long-term one? You might believe that you cannot afford
to think ahead and make plans, but in most cases you would be wrong. Most people
should be able to save some money and with some effort, maybe even as much as 20
percent of their salary each month.
Income Analysis
First of all it is important to have a handle on where your income is going.
Unless, we are on an extremely tight budget or are very money conscious for
other reasons, many of us have never really sat down and considered what our
money is being spent on – we just know that by the end of the month, it has all
gone! You will know if you are consistently spending your money on unnecessary
purchases, for example. Having this knowledge equips you with the control to
change things a little or a lot.
Saving Money Mentality
Many people have never been taught to save and as children, immediately spent
the money they received without any forethought. You often hear people say,
“Life is short, if you want something buy it now”, but thankfully for most of us
life is not really so short and along the way we will have to deal with both
opportunities and challenges. Having some money saved will help you make the
most of the opportunities and ride the challenges.
Savings – Seeing the Big Picture
If you could save 20 percent of your salary each month, imagine what that would
mean in real financial terms. For example, if you earn 2000 dollars per month
and you saved 20 percent or 400 dollars out of every pay cheque, after 12 months
you will have saved 4800 dollars! Regularly saving this amount of money would
give you the financial freedom to take advantage of more of life’s
opportunities. You could plan the special holiday you have always wanted to go
on, buy the car that you have been dreaming about for years, or help put a child
through college. When it comes to life’s challenges, having a lump sum put away
could help you pay for private medical care or deal with an expensive plumbing
problem in the home, all without having to turn to the bank for a loan and
getting into debt.
How Can it Be Done?
As we have already seen, knowing exactly where your money is going is the
starting point. Next, start thinking about the big things you could achieve with
some money in the bank. Some people compensate themselves for not having what
they really want, by making many frequent small purchases and getting a
temporary “feel good” sensation afterwards. Rather than satisfying yourself with
small purchases, such as new clothes and CDs every week or always buying the
latest mobile phone, think about how much more satisfying it would be to save up
and buy or do something special, which you previously thought was out of your
reach, but is achievable with a little effort.
About the Author:
Emmanuel Mendonca is the the webmaster and publisher of Debt Genius at http://www.debtgenius.com
- a free source of information and advice on debt consolidation, getting out of
debt and saving money.
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