Steps to have a cash savings
An important requirement in managing personal finances is having the discipline to save, ie, have the discipline to set aside part of the income earned money, and save them for later use.
Acquiring the habit of savings will give us the security of knowing that we have money we can respond to any emergency or unforeseen event, we will then be able to raise money to invest and obtain new sources of revenue, for example, to acquire businesses or investments, and also allow us to raise money and then give us some pleasure that we can improve our quality of life, for example, when buying a new car, or go away.
Let’s look at a method consists of 5 steps that will help us save:
1. Develop a schedule of income and expenses
First we must develop a table of items that we generate income and expenses which we generate and the monthly amount we usually generate each game.
Revenue-generating items that we could be heading employment, business, investment, and expense items that we could generate the power lines, education, clothing, entertainment, mobility, services, debt.
For example, under “business” could have regular income of 5000 per month, under “education” could be spending habits of 1000 per month.
This table must include all items that we generate income and expenses, and we try to be as accurate as possible with the amount that we will allocate to each.
2. Identify the items which can reduce costs
Once we have developed our picture of income and regular expenses, we analyze and identify the items which could reduce costs or, in any event, the games where we could stop spending.
To identify these items, we must find those areas where we could somehow reduce costs, paying particular attention to those where we are spending too much.
For example, we note that we are spending a lot of eating out, and we could reduce costs under the heading “food” to eat more at home might notice that we are spending a lot of magazine subscriptions that are not always read, and that could reduce costs under “entertainment” to cancel those subscriptions, or might notice that we are spending too much on electricity, which could reduce costs under the heading “services” to consume less energy.
3. Develop a budget
Based on the above steps we develop a monthly budget where we note the items that generate revenue and we generate expenses and the amounts that we have projected that we generate each.
For example, under “education” we used to spend 1000, but we have not found a way to reduce her expenses, then our projection for the item “Education” will also be 1000.
But if, for example, under “entertainment” we used to spend 800, with the analysis we have done in the previous point, we could determine that from now on only spend 700, that is, our projection for the game “entertainment” will be of 700.
This budget must also determine the total of all projected revenues and projected expenditures of all, and then in the bottom of the budget to determine the difference between them.
A model of this type of budget can be found in the article how to make a personal budget.
4. Determine an amount for savings
Once we developed our budget, we proceed to determine an amount that we save each month.
That amount into savings should correspond to balance the budget, ie the difference between total revenue and total expenditure.
If we assume that this balance is not an adequate amount to save, we must rethink our budget, and evaluate whether we could further reduce costs on some items or, in any case, if we can find new ways to earn more income.
It is recommended that this amount of savings is at least 10% of total revenues.
5. Meet the budget
And finally, once developed our budget, and determined the amount that we save each month, we must implement the plans.
We have enough discipline to keep to the budget, so you always get the same amount we have identified as savings.
However, it is likely that sometimes do not get to follow exactly our budget, but what we always meet, is to book and save, no matter what happens, the same amount that we determined as savings.
Moreover, our budget must be flexible, and you may be making some adjustments if necessary, but always ensuring that the changes aim at increasing the amount into savings.
We must always ensure that that amount is growing, always looking for new ways to generate higher revenues, new ways to save or cut down, avoiding new debt, etc.
And finally, it is advisable to deposit such amount in a savings account at the bank, so we have it in a safe place, we do not feel tempted to take money out of it and, incidentally, we can gain some interest.