It’s not hard to find the benefits you can get from saving money. When you save enough, you will have more options and more importantly, it gives you peace of mind. Saving money is truly vital to anyone no matter how huge or small your paycheck is. You may have started saving but are you sure you are doing it the right way?
You read that right. There are right ways and wrong ways of saving money. There’s more to it than depositing money into your saving account. While saving seems pretty simple to many of us, there are dozens of mistakes that many of us make.
Below are some of the most common mistakes that many people make when it comes to saving:
- Not automating your savings:
Most of us are still doing the traditional way of saving. Typically, our strategy is to set an amount that we save every month or for a certain number months and when we receive our paycheck, we need to deposit or transfer the said amount to another account.
If you are relying on your willpower to save money, then there’s a good chance that you’ll abandon your saving strategy. For instance, unexpected expenses may come up or you may be attracted to buy something because the mall is on sale. You can however avoid this by automating your savings. Many banks today have a feature where you can actually send your saving to another account automatically every month. When you start doing this, you’ll eventually get used to your lifestyle without those funds. When this happens, you’ll be able to save more without even trying.
- Not paying off your debt before saving:
If you have debts, ensure you focus on eliminating this first before you start saving. If you let your debt grow, you might come to the point where you cannot save anymore or consistently because you’ll have more to pay back due to the addition of interest.
- Not Branching Out Past The Savings Account:
If you are only putting your money into a savings account and not investing it further, it could be the worst financial mistake you make.
The best interest rate you can get for a savings account is about 2%, and that’s below the rate of inflation in Nigeria, which means your money isn’t growing.
This doesn’t mean you shouldn’t be keeping your money in a savings account at all because it is important to have a good sized emergency fund in case disaster strikes; but once that’s done, putting all your money in there is a terrible financial decision.
Why? Because the money you have in a savings account could be earning you a bigger return on investment if you moved it to an investing platform.
- Giving up on having fun altogether:
While saving as much as you possibly can sounds great, saving unsustainably can actually backfire. When people set unrealistic savings goals with absolutely nothing left over for fun, they soon start to feel deprived – and in some cases that can actually drive them to abandon their savings plan altogether. A better strategy is to leave a little for enjoyment, and work towards growing your income and getting used to having more fun with less money. Having friends round for a potluck dinner and movie night rather than going out to a restaurant and the cinema is just one example.
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