World Savings Day: 6 tips for acquiring savings habits
31 de October, 2023
According to Instituto Nacional de Estatística (INE), the savings rate of Portuguese families has been falling since the pandemic. During the first quarter of 2021, the Portuguese managed to save 13.7% of their disposable income. However, in the first quarter of 2023, this percentage fell to just 5.8%. There hasn’t been such a low savings rate since 2008.
With prices rising across the board in recent months, it naturally becomes more challenging to put some money aside. However, it is precisely in contexts of inflation such as the one we are experiencing that having a financial cushion is crucial.
On this World Savings Day, discover some practical tips for acquiring savings habits on a daily basis.
Read also: 5 Podcasts about personal finance and saving
1 – Monitor your spending
The first step to saving money is to understand how much you spend. Monitor all your expenses (even those that seem insignificant, like that coffee you drink every day) and record this information. You can do this in a more archaic way, on a sheet of paper, but we suggest you do it in an Excel file or in a mobile application designed for this purpose.
Organize your expenses by category – credit, fuel, food, telecommunications, etc. – so that you can see how much you spend on average each month in each of these areas.
Then you’ll be able to identify certain expenses that you can possibly reduce or eliminate.
2 – Include savings in your monthly budget
Creating a personal or family monthly budget is a good way to plan and manage your available money. This budget should include your expenses in relation to your income and take into account non-recurring charges (such as car insurance or IUC, for example).
This monthly budget should also include savings. In other words, you should set aside a portion of your income each month. Start with a savings target that you think is reasonable and that you can meet.
3 – Start with small amounts, but be regular
If you’re starting to adopt savings habits, start with small amounts, even if they seem insignificant. However insignificant it may seem to you, if you can make it a recurring habit, it can make a difference in the medium to long term.
What’s more, as you see your piggy bank grow, it will motivate you to save more and more.
4 – Think about the difference between what you want and what you need
Sometimes we tend to confuse the concepts of wanting and needing. Do you really need to drink coffee out every day or can you drink coffee at home? Do you really need to buy a new cell phone? Do you really need a new computer or can you repair the one you already have?
Rethinking some of these decisions and behaviors can help you manage your budget more rationally and, at the end of the day, save money.
5 – Internalize the maxim “pay yourself first”
In point 2, we said that you should consider, from the outset, the part of your income that you want to put aside. This means doing it at the beginning of the month, as soon as you receive your salary.
Define the amount you want to save each month and put it away straight away. If you only do this at the end of the month, after you’ve paid all your planned expenses – and those you didn’t plan on – it’s very likely that you won’t be able to save the amount you wanted to.
It may seem silly to pay yourself before paying for essential expenses and goods, but this is a valuable weapon when it comes to acquiring savings habits.
6 – Separate your savings from your current account
If you keep money in the same account where you receive your salary and from which you pay your bills, you are more likely to fall into the temptation of spending the money you were trying to save.
A good practice is to keep your savings in a separate account from your current account. That way, you’ll have more visibility of the amount you’re spending and the amount you’re saving.
It’s never too late to start adopting these strategies and try to make your savings habits more consistent and effective. As difficult as these actions may seem at first, they will easily become more intuitive as time goes by.