It’s much easier to save money when you have a clear goal in mind. For example, if you want to have AED 100,000 saved in one year, you’ll need to save around AED 8,265 a month with a 1.5% profit rate.
So when it comes to setting your savings plan, start with the figure you want to have saved. Then work backwards to set the monthly amount you’ll need to save to achieve that goal. This will give you a clear roadmap to success, and provide a simple and effective way to monitor your savings performance each month.
Saving 20 per cent of your income is a good number to aim for.
Try the popular 50/30/20 rule
50% of your income on necessities (food, housing, transport, utility bills etc)
30% on your ‘wants’ – such as entertainment
20% to savings
While the 50/30/20 rule is a good starting point, you can never save too much. Try reducing the amount you spend on your ‘wants,’ and redirect that money into your savings. Going without that pair of designer jeans or handbag may hurt in the short-term, but achieving long-term financial freedom will be worth it.
If you can aim for a 50/20/30 savings plan, or even a 50/15/35 plan, the extra money you save will make your total grow faster in the long run.
Your savings can be earning interest, so put all the cash you don’t need day-to-day into a savings account. You can use a standing order and set an amount to transfer automatically from your current account to your savings account – to help you save regularly.
Clearing your debt as quickly as possible will free up more of your income to divert into your savings account. That means rather than paying interest, you’ll be earning interest from your bank.
If you’re only paying the minimum monthly repayment on your loan, try to cut your spending so you can increase your repayment amount. Likewise, if you’re paying off one or more credit card debts at a higher interest rate, consider refinancing with a single personal loan at a lower interest rate.
Try the Snowball Method to reduce your debt
List all your debts in ascending order
Clear the smallest debt first
This will motivate you to pay off other big debts over time
Every debt you pay off leaves you more money to pay the bigger debts
Adding a secondary income is an excellent way to boost your savings. Put the extra earnings straight into your savings account to take advantage of a high interest rate.
Many people are finding ways to monetise their passion these days. These include starting a YouTube channel, building a social media following, selling hand-crafted items, even self-publishing a book. The possibilities are endless and all it takes is a bit of effort to make it happen.
Achieving financial freedom doesn’t happen by accident. You cannot get rich overnight. You need to make an effective savings plan and stick to it. Having a long-term goal that has milestones along the way helps you to keep focus as you achieve each one.
Want to save better? Get your savings off to an excellent start with a Standard Chartered XtraSaver Account.