Financial Education 101 Lesson 1: Savings

FINANCIAL EDUCATION 101

with Dodong Tipid

It's not easy building a habit of saving money, it takes time, self-discipline, self-control and a step by step process. To start saving, you don't need a lot of money, you can do it by starting slow and small. Don't force yourself to save big money, all you need to do is build the habit of saving. Trust me it will work, just try it. Save little by little, it's not about math - it's all about momentum. So let's get started!

Lesson 1: Savings

Formula of saving:

According to Warren Buffett, one of the greatest investor of all time, the Chairman and CEO of Bershire Hathaway and the 3rd richest man in the world (as of writing this), he said "Do not save what is left after spending, but spend what is left after saving". So, what is he really trying to say? Once you have received your allowance or income, do not spend it but first you need to take a portion of it and save it then spend what is left.

You can also use this formula:

The 80-20 rule - 80% of your allowance or income should go to expenses and 20% of it should go to savings. But still you can change it, as long as it's comfortable for you.

The 70-20-10 rule - 70% for the expenses, 20% for the savings and 10% for tithing or offerings to God and to the poor. It's up to you if you want to change each percentage.

Three Rules in Saving Money

1. Save. Pay yourself first whenever you get money.
2. Spend less.
3. Only buy what you need, not what you want.

SETTING GOALS:

Short-term Goals—take no more than one or two years to achieve.

Examples of short-term goals:

• Build an emergency fund
• Pay down debt
• Save for a vacation

Long-term Goals—take longer than a couple of years to achieve.
Examples of long-term goals:

• Buy a car
• Buy a home
• Pay for your children’s college education
• Save enough for a secure retirement
  

Be specific when setting goals

• Which are my short-term goals?

• Which are my long-term goals?

• Which goals are most important to me?

• How much money will I need to save each month to achieve these goals?

Try to be specific when setting goals specific with your financial goals.

Look carefully at your list of goals and ask yourself:

Keep your list in a visible place where you will look at it often. It will always remind you that you have a goal that you have to achieve. Try writing down your goals right now, identify the short term and the long term goals that you want to achieve. Have a plan, not just a plan but a written plan and be consistent, if you really want to achieve those goals, be consistent! Put saving at the top of your to-do list every month. You are the only one who can make it a priority to pay yourself first. Always put in your mind that hard work pays off, sooner or later you will harvest it! Also make sure you’re not spending more than you earn every month. See where can you cut back your spending and apply the extra funds to your savings. And remember, your goals must be SMART goals, Specific, Measurable, Attainable, Relevant and Time-bound.

10 Tips that you must do to SAVE:

1. Whenever you get money, put some into savings right away.
2. Be consistent, be disciplined.
3. Set a savings goal. Think about your dreams that you want to achieve.
4. Slow down your spending. Think more about saving.
5. Keep your savings in a safe place so that you’re not tempted to spend it.
6. Include saving in your budget. Even small amounts add up over time.
7. Talk to your friends and family about saving. Support one another’s goals.
8. Save your money by opening a savings account in a bank or in a cooperative.
9. Consider having an emergency fund. Aim to save three to six months of living expenses.
10. Monitor how well you’re saving.
11. 11th Tip (The Golden Rule): Live below your means and spend less than you earn.

We should live below our means and spend less than what we earn. There's a quote saying, "Don't go broke trying to look rich. Act your wage!". A lot of people are like this, they buy unnecessary things for them to look rich and feel good just to impress someone or people they don't like.

When is the right time to save?

Now is the right time, so start saving NOW! I hope you learn something today. And I also hope you continue to visit my blog. Lesson 2 is all about investments but before that, I will be posting something on how we can change your mindset into a investor/business mindset before we proceed to lesson 2. Thank you and continue your journey towards financial freedom! :)