Whether you are a student or a dedicated employee, you should know that there are many ways to stay wealthy on an average and low income. Hardly anybody talks about saving money, even though there are many opportunities to do it. As of 2021, the average wage in the USA is $51,916.27 per year, making it quite affordable for most US residents. Yet, why is there still a 13.7% of poverty rate among American people?
The question is quite simple. People live over what they make, causing difficulties to save extra cash. Many prefer to live in fancy apartments, buy luxury cars, or purchase brand clothes that they cannot afford. If you are broke, do not take an Uber or drink a $7 coffee at Starbucks. Instead, taking a bus and making coffee at home is the first step to start saving money. There is no fast way to save funds but there is a consistency that will lead you there.
So, what should you do as a first step when you get paid at your job? Most people cannot pass the second step. But if you stay patient and consistent, you will build a successful financial future.
Most people do not understand how to manage their money because school and parents do not teach them about it.How to Start Saving Money in 6 Steps:
- Have an Active Retirement Plan
Before you receive your paycheck, you may want to contribute 5%-15% to your retirement funds. For some of you, it might be depressing to think about poverty during retirement, that is why you can benefit from leaving some percentage of your money in your retirement funds account. If you decide to choose to contribute money to your retirement plan, make sure to talk to your employer, and if they do not offer these opportunities, the government might have something similar on offer to you in the United States.
- Use Checking Account
There are many ways you can get paid. Some employees get paid in cash or cheques, while others receive a direct deposit to the checking account. If you are receiving cash or cheques, it is a good idea to deposit them into your bank account as it saves more time. When you deposit your money in a checking account, it will be easier for you to pay off credit cards and transfer some money to your savings account. Also, you will always know how much money you have left and prevent unnecessary spending.
- Only Pay for Necessities
What are necessities? Necessities are the things that you need in your everyday life. Note that it does not include TV, Xbox, cosmetics, or a movie ticket, instead it is more about human basic needs such as food, rent, transportation, healthcare, and utilities. Depending on how many kids you have or how many people live with you, it should not be an excessive amount of money you will spend on paying those bills.Make sure to understand the difference between “needs” and “wants”. For instance, when you want to eat at Starbucks, remember that you can buy groceries and cook food of better quality at lower prices. However, you do not wanna skip the medical appointment to save money because your health is important and needs proper treatments.Once you paid all of your necessities, do not forget to pay minimum payments on your credit card, if applicable. If you skipped one month of paying off your credit card, make sure to pay the minimum payment to avoid decreasing your credit score.
- Create an Emergency Fund
Everyone needs to have an emergency fund, whether it is $1,000 or $100,000 in your savings account. It will help avoid financial stress, in case of losing the job or other unexpected circumstances. So, how do you start?Start by simply taking $10 or more out of your paycheck and putting them into separate emergency funds that are liquid and easily accessible. Emergency funds can include the cost of repair you need for your car to get to work or other situations like medical bills. However, an emergency fund should not apply when you feel like going out with your friends or buying a new pair of jeans.Stay patient and consistent to build an emergency fund and consider having more if you have a family to take care of. Even when you are in debt, emergency funds will help you in a challenging situation, especially during the COVID-19 pandemic.
- Pay Off Your Debt
Once you built an emergency fund and you are financially stable, consider starting to pay off your debts. What’s your plan for paying off the debts? There are various strategies you can use to pay off your debts, depending on what kind of person you are and how much active debt you have.Usually, people who are not financially stable have more debts to pay off. If you struggle to stay consistent and motivated to pay off debt, you might want to use a Debt-Snowball Method. A debt-snowball method means that you have to start paying the debt with the lowest amount of money. For example, if you have five different debts, you should choose the lowest one, without looking at the interest rate, to eradicate it. It might be depressing and frustrating to try paying off all debts at once, that is why a debt-snowball method is the best choice for it.Debt-Avalanche Method is mathematical and logical, and can easily save you money, however, it depends on how much you strive to become debt-free. This method works by starting to pay off the highest interest rate debt first from different types of debts. In most cases, credit cards have an interest rate up to 20% or more in the annual percentage rate (APR). As mentioned before, do not forget to pay off your minimum payments on the credit card as it will save you funds and maintain a stable credit score.
- Online Savings
Having extra money in your online saving account is necessary to avoid unexpected circumstances. Make sure to be always one step ahead in case you need to cover extra expenses. Also, the benefit of having an online saving account is the extra 1%-2% you receive for holding funds with your bank. Note that different banks have different offers, meaning that the percentage rate can be significantly higher or lower.Remember that you decide to invest in your saving account, however, remember that many people lose their jobs due to inflation or the COVID-19 pandemic. Having funds for the future can give you extra time to find a new job, without limiting buying your necessities.
Additional Tips on Saving Money
For many of you who are looking for extra tips on saving funds, you can try to train your brain. Well, how do you start?
Start by setting goals you want to achieve in your life and remember that you need to be clear to succeed. For example, if you have a financial goal to make $100,000 per year, even though you are making much less at the moment, think about how you can train your brain to help achieve this goal. Set your goals clearly on the exact amount you want to earn per week, per month, or year. Secondly, create a simple affirmation or even a finance essay that you are going to read repeatedly every single morning and evening before going to bed. When you read, close your eyes and visualize the consistency of having funds and the impact that money has on your family, friends, and yourself. Your affirmation might look like this: ”I am happy and grateful for earning $2,000 a month at this moment.” When you mentally rehearse and visualize the funds and feeling they bring into your life, it primes your brain to see and feel as if it was real at the moment, activating the left prefrontal cortex. It can help you figure out how to achieve the goal.
In addition, you can consider expanding your mindset to achieve the desired goals. Stop watching TV and get more useful information. You only have 24 hours every day to commit yourself to something that will help you achieve your goals. There are lots of various professional studies that could back your mindset up – resort to them, and don’t waste your time.
As of 2021, 59% of Americans live paycheck to paycheck, while more than a half own businesses. Yet, some people who do not have any funds, who chose to not have any money, overspend and do not know how to produce funds. It is important to understand that complaining has no value and if you need money, go ahead and work for it. Poor people say they do not have time, they do not know how to do that, and they cannot afford to buy something, making it an escape.
Money itself does not have value, instead, it is a vector of transferring value that comes from the service or product you recently purchased.
Conclusion
After reading this article, you will acquire some necessary knowledge that can help you become financially free, whether you are a college student or an employee. It will positively benefit you in the learning process. Luckily, you will be able to pay off your debts fast and create an emergency fund for the future.
Additionally, remember that many of you can choose to start changing your mindset to help overcome financial and other related problems. Make sure to watch more videos and read additional articles to learn about mindset change and its impact on achieving set goals at a fast pace. If you require assistance with writing a finance essay, make sure to check ways how the GetFinanceEssay could back you up.