HOW TO SAVE EFFECTIVELY

EDDIE ASKS…

I’m a twenty-three-year-old professional single man. Ever since I started working, it seems that my financial life has not quite improved as I thought it would. I don’t know if it’s me or not, but I feel that things were once a lot cheaper — and I don’t think inflation is the only thing to blame.

Before the current job, I used to take vacations and go out for the usual weekly dinners. But now, I find myself struggling to make the rent payments at the end of the month. Is there any way for me to get out of this financial slump and how do I ensure I save well?

Yes, inflation does have an effect on the value of your hard-earned dollar. And yes, one dollar back in the day went a lot further than it does today. But people fail to realize that the value of their dollar is relative to the period in which they live. Sure, a dollar bought you more goods thirty years ago, but you also earned a lot less than you do today.
I think some saving tips should do you a lot of good for this kind of a problem and I have a few quite effective ones:

1.Change your habits
That old cliché will never fade: “Things were a lot cheaper back in the day.” but even though things were a lot cheaper back in the day, people also earned a lot less and still had to save money to buy such “inexpensive” goods.
Regardless of the period you find yourself in, you still need to know the basic money-saving strategies that your grandparents and parents used in order to help them save for a comfortable lifestyle.

2. Reality check
Before making any big purchases, stop and make sure that your emotions are not the ones making the decisions. People tend to make irrational decisions based on their wants rather than their needs. I recommend that you analyze your personal situation and get a grip on reality before making any big purchases.Do you really need the $2500 professional turbo-digital photo deluxe camera, or can you settle for the $600 digital camera that will serve your needs just fine?
3. Shop around
Before committing to a final purchase, I recommend that you shop around. Browsing for alternatives doesn’t take much effort and in the end, it will save you from nasty surprises and can literally save you thousands of shillings.

If you don’t have the time to shop around, I suggest that you at least get all the details from one merchant and then call others to compare prices. When you get the lowest price, go back to the original merchant and tell him that if he beats the lowest price, you will definitely buy the product from him.

Bargain
Some people are too proud to bargain down a final price or use coupons to save money. But you’d be surprised to know that it is usually the wealthy people who bargain the most. This would explain why they’re so wealthy; they know the value of their hard-earned money and are not eager to part from it.
Other side tips that may help you are:

1. Don’t spend your whole paycheck
Start out by saving small amounts of your income. Try to save between 15 to 18% of every paycheck, but don’t get worried if you see that you cannot save that much. The important thing is to save a little on a consistent basis.

2. Reduce amount of ATM fees
Every time you make a withdrawal using your debit card, you are charged an extra fixed rate. That fee is even higher if you’re not making the withdrawal at your own bank.

So instead of making multiple withdrawals, estimate how much cash you’ll need to last you the whole week and make only one withdrawal at your own bank. If you have any money left over at the end of the week, put it into your savings account.

3. Keep a close eye on your money
Keep a weekly and/or monthly budget and keep track of where you’re spending your money. Those who know where their money’s dispensed tend to spend less and save more. By keeping track of your expenditures, you’ll have a better idea of how much money you’ve already spent this week, for example, which will prevent you from going over your budget.

4. Pay off all your short-term loans
Money that you’re spending on interest payments is money that you could be saving. Try to reduce or eliminate any short-term debts such as credit card balances, or car and student loans.

5. Set up an automatic savings plan
People often get into the nasty habit of procrastinating or poorly performing a task such as saving money on a consistent basis. Arrange to have as little as $30 a month deducted from your bank account and deposited into a savings or better yet, a mutual fund account or a SACCO that requires a constant amount of deposits per month.

Hope these tips help. Eddie and good luck.