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Budgeting Tips to Increase Your Savings in 2021

Nearly all of us have had to face the problem of saving money. While today’s high cost of living isn't very conducive to extensive saving, but you should still learn the strategies to increase your savings within your means. In the following article, I am going to share with you a number of tips and techniques on how you can improve your budgeting and optimize your savings each month.

The Importance of Budgeting

The value of budgeting comes from the fact that if you do not spend within your means, you will fall into a state of debt. If this debt is not managed, it will result in a severe state of financial crisis for you. In particular, if you are holding onto credit card debt, the amount owed usually grows by 20% a year! Hence, you need to budget appropriately by following an appropriate financial plan. What you should aim for is to spend 50% of your income on your needs, 30% of your income on your wants, and the remaining 20% of your income should be devoted solely to savings. This ratio is not a fixed prescription, but it is a recommended arrangement to start with.

Expense Tracking

Credit: Wally

The secret to excelling in money management is knowing just how you're spending your money. You want to track all of your expenses by keeping a journal or an excel sheet where you keep all of your expenses written down. Divide up your expenses into a number of categories such as necessities, food, transport, education, debt, and leisure. This will assist you in understanding the amount of money that you're spending as well as the different areas where you can cut down your expenses. Tracking your expenses will also help you understand where your money is spent, so it is very useful to understand how much money you're spending and where it is being spent. This also helps you ensure that you are following your budget of spending no more than 50% on needs and 30% on wants.

Automated Savings

Another concept you should know is automated savings. You can also name it as forced savings. You can instruct your bank to deduct a specific portion or a certain amount from your salary every month as soon as it gets credited. Make your budget, calculate your expenses and save the rest! This would be the 20% savings which you should minimally be aiming for. If you are able to increase your savings rate further, kudos to you.

How do you start tracking your Expenses and reducing your Expenditure?

Budgeting can make or break your saving goals. It gives you control of your finances, helps you save for your future, and you will never find yourself out on money. Budgeting also helps you focus on your saving goals, getting rid of loans, gets you prepared for emergencies, helps in creating and achieving long-term financial goals. Budgeting helps you spend only what you earn, which means it will help you avoid credit card shopping/ personal loans. You can make use of the following 5 tips to better track your expenses for each month.

1. Use your debit and credit card statements to record the amount of money spent in non-cash transactions. Check out the top credit cards to sign up for here.

2 Acquire an expense tracker application such as Wally where you can track the amount of money (in cash) that you spend on various different things each month and set up reminders for yourself to pay your bills and debts by certain dates and times.

3. Save before spending. Once you receive your paycheque, don't make the mistake of first spending all of the money that you want and then saving what is left. You should remove the money that you wish to save first and then spend what is left. This is what we discussed in the Automated Savings section.

4. Once you have created a budget for yourself, you need to place all of your savings in a high-yield savings account so that you can receive a good return on your savings.

5. Always keep an emergency fund as well, so that you are prepared for large, unexpected purchases/expenses.

In these hard times, where the world is struggling financially and against the ongoing pandemic, we all need to be prepared for the future. So, start saving today, and make your future secure. You can place your savings to work in high-yield savings account (1.5%), dividend companies (5%), ETFs (10%) and Value-Growth Companies (15%). The benefit of doing this is that it will provide you with a good stream of passive income as you work hard for your pay check.


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