You’ve been squirrelling away some of your salary to grow your nest egg every month.
But if you have a specific savings goal in mind, you need a different strategy to enjoy the fruits of your labour faster.
According to Stephen Mok, a financial consultant at IPP Financial Advisers in Singapore, you should first have six to 12 months’ worth of your expenses stashed away, in case you are retrenched.
Also ensure that you have adequate medical insurance for yourself and your family.
“Insurance is the foundation of any financial plan. Premature death, major illness or disability can prevent you from reaching your savings goals,” says Stephen.
Once you have both steps in place, you can start planning to save for what you want.
Here are Stephen’s top five tips to save more and spend less.
1 SET A BUDGET TO AVOID OVERSPENDING
Create a personal daily, weekly or monthly budget, and keep to it. Prioritise your spending: log in all important expenses first. But also be realistic about what you can and can’t save or spend. Keep refining your budget until you are satisfied with it.
2 BE MINDFUL ABOUT SPENDING
Put enough money in your wallet to spend for a day or two, so you won’t be tempted to spend unnecessarily. Buy only what you need, not what you want. You can also separate your money into different parts of your wallet for different expenses: food, entertainment, transport, kids, and so on. That’s visual budgeting on the go!
3 EVEN SMALL CHANGE ADDS UP
Drop all those coins in your bag into a box and be amazed at how much you can save in a year. When the box is full, stash the cash away in your savings account or reward yourself with something you want.
4 BE CREDIT-CARD SMART
Leave home without them. Use cash instead, to avoid spending on impulse with money you do not have. You can always go back to the shop the next day, with your credit card, if you really need the item.
5 LITTLE THINGS COUNT, TOO
Bring your lunch to work, limit your taxi rides, and reduce your regular treats. For example, you can save about $700 a year if you limit your daily $5 cappuccinos to a twice-weekly treat. Ask yourself what else you can trim so you can save faster.
This article was first published in Simply Her July 2012. Image: Getty Images