Proven ways to save money for a better tomorrow

Here are 6 effective ways to save money:

1-    Setting a monthly budget

Contemplating saving is not enough; individuals should create a budget that outlines how they will manage their finances. This plan must detail monthly income and expenses, both major and minor, recorded in the most suitable format, whether on a paper or a digital spreadsheet. Prioritising expenses and dividing income accordingly are essential. It is crucial to be realistic and honest when setting a monthly budget to ensure its feasibility. Otherwise, adhering to it may be challenging, hindering the achievement of financial goals.     

The UAE Ministry of Finance recommends on its official website the 50/30/20 rule as one of the most popular ways of dividing income to save money effectively. This method allocates 50% of income to living expenses, such as utilities, rent, groceries, etc. Another 30% is allocated to personal leisure like purchasing a new smartphone, visiting a tourist attraction, or enjoying other affordable leisure activities. The remaining 20% is for savings, which may include an emergency fund, debt reduction, or saving in a bank. These percentages can be adjusted to fit individual needs and financial goals.

2-    Identifying saving goals

Identifying saving goals stands as the foremost driver of accomplishment, be it short-term goals like paying off some debt or saving for a wonderful holiday, medium-term goals such as buying a new car, or long-term goals like purchasing a new home or funding a major project.

Setting clear savings goals helps determine the required amount and time frame, making the saving process more focused and effective. Moreover, writing down goals, setting a specific timeline, and keeping them in mind also increases commitment and motivation.

3-     Automating the saving process

One of the UAE Ministry of Finance’s golden pieces of advice is: “Do not save what is left after spending; spend what is left after saving.” Putting off saving until the end of the month, after covering all other expenses, often makes saving challenging and lowers its priority. Therefore, automating the saving process is crucial. This can be achieved by setting up automatic transfers from salary to savings account or depositing a portion of income from freelance work, rental income, or similar sources.

4-    Choosing the right saving tools

Numerous saving tools are available for individuals to use in their saving journey. These include savings accounts, which allow for deposits and withdrawals at any time, and fixed deposit accounts, which restrict access to savings for a set period of time, ranging from a few months to years.

To choose the most suitable saving method, individuals must first determine their short-term and long-term financial goals. Then, they should explore the various options offered by banks and financial institutions, assessing their performance and potential risks.

5-    Searching for ways to cut expenses

When saving capacity is limited, it is crucial to identify unnecessary expenses, cut down on spending, and discover ways to minimise basic costs. This will free up extra money to channel into savings and help achieve the desired financial goals.

One of the best strategies for reducing unnecessary expenses is eliminating non-essential costs with minimal effort, such as unused subscriptions and memberships, specifically those with automatic renewal. Furthermore, reducing daily expenditures can make a significant difference. This includes avoiding recreational shopping, creating a shopping list based on needs rather than wants, choosing affordable brands, preparing meals at home instead of frequently dining out, enjoying free leisure activities, rationalising water and electricity consumption, and so on.   

6-    Monitoring the saving process

Regularly reviewing the budget and evaluating the progress of the saving process help individuals adhere to their saving plans and identify any issues hindering success. This approach enables the prompt identification of solutions to help achieve financial goals. Furthermore, observing savings growth can inspire and motivate individuals to explore additional saving methods, thus accelerating the achievement of their financial objectives. 

In conclusion, it is crucial to remember that goals without a plan are merely aspirations. Prioritising savings promptly and utilising the aforementioned saving methods are essential to accomplish financial goals. Additionally, people should realise that saving does not mean forgoing activities that contribute to their well-being, such as celebrations or entertainment. Instead, it involves maintaining a healthy balance between spending and saving.

References

[1] bettermoneyhabits.bankofamerica.com, 8 simple ways to save money
[2] investopedia.com, 10 Ways to Effectively Save for the Future
[3] regions.com, 10 Best Ways to Save Money
[4] mof.gov.ae, ادخر اليوم.. لتحقق أهدافك المالية غداً
[5] moneysmart.gov.au, Simple ways to save money