“That's what I work for,” “Life is only one, and we don't know if tomorrow we will be alive,” and “Money comes and goes.” These are some of the phrases that people say to justify sudden or unnecessary expenses, forgetting to save, even when they intend to do so to achieve some personal goal.
There is no doubt that for many; it is a challenge to save, either because they feel that they do not earn enough, because their currency loses value over time, or because, not understanding the power of saving, they succumb to the temptation of immediacy. In addition, this skill is not usually taught in school or university, which is why many do not even know how to start putting it into practice.
So in this article, we will help you better understand the importance of saving so that after reading it, you feel ready to start saving, even if you still do not have your desired salary or if you live in Latin America, one of the continents where it is more challenging to access savings.
What is savings?
Savings is the portion of income that is not used for immediate consumption. For this, a part of the money that has been earned must be reserved to use in the future. To achieve this, you must create the habit of saving since doing so sporadically only leads to frustration because the funds are insufficient.
Why is it important to save?
You can live for many years without savings, only using your recurring income; however, most of the time, the monthly payment is insufficient to cover everything you want, but by saving, you can create a fund that will allow you in the future to make expenses or investments that bring you greater well-being and satisfaction. You can even use savings to access opportunities that offer you a better income.
Below we summarize the main reasons why everyone should save.
- It is necessary to fulfill goals and dreams: If you dream of traveling, being independent, starting a business, having a vehicle, or greater well-being, rest assured that the first step is to save; not doing so will only delay you in your life plans and goals. So even if today you see it as a sacrifice to give up a night out with friends, not go to your favorite restaurant or not buy everything you want, in the long run, you will feel grateful for having achieved your goals.
- It allows you to access credit: When applying for credit from banking institutions or independent lenders, it is crucial to demonstrate that you can save and have enough money to pay the loan.
- It helps you deal with unforeseen events: Health emergencies, repairs to your home, or an unexpected layoff are situations that often occur without prior notice and can lead you to run out of money or incur overwhelming debts. Therefore, saving allows you to face these unforeseen events better, so the expense is not so significant.
How to start saving if you don't earn enough money?
This is the question that many often ask themselves, and although it is more difficult to save when you obtain an income that does not cover all your needs, it does not have to become an impossible task. As we mentioned before, saving can become a tool that allows you to earn more money in the future.
For example, you can set the goal of saving to study a course or specialization that will later allow you to access a better job and, therefore, improve your income.
In addition, those who learn to cultivate the habit of saving with not-so-high incomes later have a more extraordinary ability to save and better manage more significant sums of money as soon as they generate higher revenues. While those who think that "only by earning more money will I be able to save" end up being unable to do so, even when their income increases, which usually leads them to squander or incur debts they cannot pay later.
Here we share an essential roadmap that will help you start saving, even if you have not yet reached your desired financial level.
- Set yourself a clear and realistic goal
. What do you want to do with the money you save? Buy a house or a car? Pay for your studies? To travel? Have an emergency fund? No matter your goal, you must write it down and be very clear about it, so you must inform yourself about the budget you require and establish how long you want to achieve it.
To be realistic, you must consider a term in accordance with your savings capacity; otherwise, you will get frustrated for not meeting it.
- Organize a budget
By having a clear objective, you will know how much you should allocate monthly to savings, and you will think about it several times before spending that money on some compulsive purchase that will not help you achieve your goals.
For this, you must evaluate how much you spend on basic needs such as food, rent, payment of services, and any other essential expenses you must make monthly. And, of course, include different types of costs since being aware of them will allow you to consider whether or not they should be included in the budget.
By knowing your expenses, you will be able to create a budget of how much is the maximum you will spend in each category, so you will make better decisions and avoid overdoing it. It can be beneficial to use a spreadsheet or an application in which you can record your expenses.
- Learn to differentiate between needs and desires
Is going out every weekend to parties or gatherings with friends a necessity? Or does it respond more to a wish? Although you may feel that it is "necessary to clear the mind after so much hard work," the reality is that this is usually associated more with desires than needs.
Remember that basic needs are those that you must cover to stay alive. Of course, it's also important to satisfy wants, but identifying which expenses are need-driven and want-driven will help you choose which ones to prioritize and get those that can be excluded from your budget while improving your economic status.
- Save in a strong currency
One of the challenges of saving in Latin America is that, over time, your national currency can lose value, which is quite common in countries like Venezuela and Argentina. To prevent your money from drastically losing its purchasing power, we recommend using a more stable currency, such as dollars or euros.
For example, when you receive your monthly payment, you can buy the equivalent in dollars of the budget you have established to save. Then, when the established period has elapsed, you can exchange the dollars again for your national currency to use without restrictions.
- Use a single account to save
If the money for your daily expenses and your savings are in the same account, you risk being tempted to spend what you have saved or confused about how much you have available to spend.
You can use your El Dorado to avoid these inconveniences and keep only your savings there. This way, you will know precisely your advances and total amount saved, which you can change to your national currency when you need it, using our P2P.