SAVING means to set something (i.e. income) aside for use in the future.
SAVING VS. INVESTING
Investing is when you commit money for the purpose of making profit over time. It involves RISK.
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Saving is when you set money aside for use in the future. It does not involve RISK.
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When it comes to investing, you have to think about saving. When it comes to saving, you have to think about investing.
WHY SAVE?
Many people who save have an ideal purpose in mind; they have something that they want to save for. People save for EMERGENCIES, EXPENSES, LONG TERM GOALS, RETIREMENT, and FUTURE PURCHASES, etc.
Emergencies.
Honestly, you never know what can happen at times. Many things go unplanned or are unexpected. What if you get fired from your job or unexpected medical bills appear. To prevent from not having money to pay for emergencies like these, people create emergency funds.
Expenses.
Expenses; almost everyone has them. Recurring expenses are what most people save money for. Things like your electricity bill or water bill are recurring expenses.
LONG TERM GOALS.
Often, people like to save for 'long term goals.' Saving to buy a larger house or saving for a new computer is a long term goal.
RETIREMENT.
Eventually, everyone retires. You should save for retirement when you're young, ideally. (in order to save more money over time) Saving for retirement helps you pay expenses when you stop working.
FUTURE PURCHASES.
This links closely with 'long term goals.' The only difference is that 'long term goals' take a longer time. In a 'long term goal' you save money over time to buy it. Future purchases may just be like a new TV or clothes, etc.
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MOTIVATION.
Honestly, saving money isn't fun; though, spending money is fun. So, how do get the motivation to save rather then spend? You have to remind yourself. In order to motivate yourself to work, you need to remind yourself of the reason you want to save for. Saving for college? Put up pictures of the college or stickers. You should put anything up around you to remind yourself. Saving for a vacation or trip? Put a picture of the place on your bathroom mirror. Motivate yourself.
PAY YOURSELF FIRST.
Ever heard of the phrase, "Pay yourself first"? This means save BEFORE you SPEND. When you get your paycheck, don't pay for your expenses first; put a set amount of money into a savings account first. Then, pay your expenses. This helps you save over time.
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PAYROLL DEDUCTIONS
With most things being electronic these days, you can actually have the company you work for directly deposit a fixed amount of your paycheck to your savings account.
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SAVINGS PLAN.
Need help saving? Don't know where to start? Make a plan.
1) Decide what your saving for.
Whether your saving for a new house, retirement, or something else; Decide on what you want to save for.
2) Set a specific goal.
If you set goals when saving, everything will go smoothly. Try to set a goal like, "I'll save $60 every week, so I'll have $3,120 by the end of the year. Make sure it's realistic and break it down.
3) Seperate your long-term and short-term goals.
Make sure your seperate long-term and short-term goals. You should focus on the goals that are more important or realistic; you should save depending on that.
4) Save regularly.
You should save regularly; save a set amount money every week, month, year, after every paycheck you get, etc.
5) Put your money to work.
Put your money into multiple saving funds. You should save for retirement, emergencies, expenses, future purchases, and your long term goals.
6) Remind yourself.
If you remind yourself of your goals and what your saving for, you'll be able to motivate yourself to save.
GOALS are important when saving, make sure you understand how to set them before saving.
COMPOUND INTEREST vs SIMPLE INTEREST.
What's the difference between compound interest and simple interest?
Well, COMPOUND interest is interest calculated on the initial principal and also on the collected interest of previous periods of a deposit or loan. (periodically)(http://www.investopedia.com/terms/c/compoundinterest.asp?ad=dirN&qo=serpSearchTopBox&qsrc=1&o=40186) |
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SIMPLE interest is a quick method of calculating the interest charge on a loan. (http://www.investopedia.com/terms/s/simple_interest.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186)
Understanding what compound interest and simple interest will help when saving money.
Compound Interest Calculator.
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What to calculate the amount how much money you'll have if you save for a certain amount of years? Use this calculator.
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You must be smart when saving. You should know how to set goals and what you're saving for. Saving takes time and patience.