My Journey to Financial Savvy: How I Save and Why It Matters
Welcome to my first post about why it is important to save money! Today, I’ll share how I save, how much I save from my salary, and why saving is important to me. Are you interested in saving money? Do you have any tips on how to save effectively? I’d love to hear your thoughts in the comments!
Saving comes naturally to me, not just because I have a well-paying job, but because it’s in my DNA. To understand my approach to saving, we need to take a trip down memory lane.
Growing up, my parents didn’t have much. I wore inexpensive clothes, and we didn’t have a fancy car or home. My parents even had a mortgage in the 90s when interest rates soared to 20%. Yes, 20%! That’s over five times higher than today’s rates. My parents were never big spenders, so I learned early on that saving money was good and spending was bad. Well, it wasn’t that black and white, but it was somewhere in the grey area. Encouraged to save rather than spend, I started saving my weekly allowance and earnings from summer jobs. This habit continued through my studies, where I saved most of my income from part-time jobs and avoided unnecessary expenses.
At one point, my saving habits went too far, but I eventually learned to balance saving and spending. Life is short, and any day could be our last, so I understand the YOLO (You Only Live Once) mindset. My challenge was that I had ingrained the idea that saving was the most important thing. Nowadays, I can spend money more easily, but mainly on things I love. Saving is still my strength, even more so than earning over 5% annual profit on my savings.
Navigating Inflation: Why Saving Alone Isn’t Enough
Now that we’ve explored the past, let’s focus on the present. Simply saving money isn’t enough; you also need to earn a return on your savings to keep up with inflation. To maintain the purchasing power of your money, you need to earn interest equal to or greater than the inflation rate.
I recently looked at the inflation rates from August around the world, and here are a few examples (from lowest to highest):
- Afghanistan: -6.6% (lowest)
- China: 0.6%
- Finland: 1.2%
- Sweden: 1.9%
- Indonesia: 2.12%
- United Kingdom: 2.2%
- United States: 2.5%
- Norway: 2.6%
- India: 3.65%
- Argentina: 237% (highest)
(Source: Trading Economics)
Based on Trading Economics, the median global inflation rate is currently 4.3%. This means that if you live in a country with a 4.3% inflation rate, you need to earn at least 4.3% interest annually just to maintain your money’s value. Achieving this can be challenging but not impossible. However, for those in Argentina, where inflation is 237%, earning a comparable return is nearly impossible without taking significant risks.
Understanding inflation highlights the importance of not just saving money but also making it grow. Otherwise, it’s like throwing some of it away each year. I’ve tried to make a profit from the money I saved, but the stock market has been unpredictable, with highs and lows influenced by luck. While I’ve managed to gain some profit, it’s nowhere near the average 7% annual return that many achieve in the stock market. If I could go back, I would invest more in funds, as they are better diversified and less volatile. It feels like a safer choice.
How I Save Money: Practical Tips and Personal Insights
Now let’s dive into how I save money. I save a large portion of my income and always have. Currently, I save more than 70% of my net income every month. How do I do it? Here are some of my strategies:
- Public Transportation: I use public transportation, which significantly reduces my monthly costs.
- Home Ownership: Owning my home helps lower my monthly expenses.
- Smart Shopping: I purchase discounted products or sale items in grocery stores and utilize discounts for services like Max or SkyShowtime.
- Home Entertainment: I stopped going to the cinema after getting my new Samsung Neo QLED TV. This saves me hundreds of euros a year, and I get to enjoy movies at home without any disturbances (and I can take bathroom breaks whenever I want).
I also cook at home frequently and rarely eat out, maybe a few times a month. This habit saves me a few hundred euros each month. Growing up, we cooked a lot at home and rarely ate out, except for the occasional visit to a local pizzeria. I cherish those memories and loved the home cooking (most of the time), which is probably why I prefer cooking at home now. It’s also healthier than eating out, where meals are often deep-fried or less nutritious.
I’ve never felt the need to own the latest gadgets or the fanciest car. We all have different priorities, and I’m not judging. This is how I’ve managed to save money, and I believe you can too! It’s all about taking action and having self-control. If you struggle with saving, try micro-saving, like transferring a dollar to a separate savings account every time you use your credit card. This method is especially popular among the younger generation.
My goal is to save a significant portion of my income in the coming years before my spouse and I move to a bigger home. I don’t know if I’ll be working until I’m in my 70s, so it’s important to save now to have something to fall back on if I decide to retire in my 60s. A couple of thousand euros in the bank wouldn’t be enough. These are the reasons I’ve been saving money since my first summer job.
Why do you save money? What are your goals? Let me know in the comments below!
Also, check out my first blog post on how I started my blogging journey here. All of my recent posts can also be found below. Hope to see you here soon again!
This post has been enhanced using AI for text improvement.