23 July 2007

Fixing your Money Problems - 2

Part 2: (Money Adds Up)

In part 1, I spoke about how it takes a small flow of money that keeps coming to build up wealth for you. This takes time, so don't expect it to happen overnight, and needs a little bit of persistance. Here I will give you a few tips on how to build a way to actually save; again, i'll be giving lots of random information here, but i'll definately go back over everything and summarize later on.

First thing you need to realize is (this is true for most people), no matter what salary you get, you're probably going to end up spending most of it by the end of the month. If you recieve a 300 dinar salary, and you manage to spend most of it, then suddenly you get an increase to 500 dinars, you won't actually be left with the extra 200 at the end of the month. Most people automatically increase their spending to match their income; visit more expensive restaurants, buy more things, etc, and so, even with a pay rise, you still end up with little or nothing at the end of the month. Its just impulse. What you need to do is be aware of this fact, and use it in your favor.

Most people have one bank account in which their salary is paid. Others get paid in cash. Now, without separating the amount you want to save beforehand, you're probably going to end up spending it, even if you plan/try not to.

Here's a VERY useful tip; open a new separate savings account with whatever bank you deal with. Figure out the amount of money you want to save from your salary, (lets say 100 dinars); as SOON as you get your salary, take out 100 and put it in the new account. Now, you need to totally ignore this new account, forget it even exists. Just use it to deposit money, and don't even think about withdrawing anything from it. You don't even need to check the balance; if it comes with an ATM card, just cut it up and throw it in the bin, or at least don't carry it around with you. You need to make sure you make is as difficult for yourself to withdraw any money from this account. Over time, it will collect value. Use the remaining salary to do whatever you want.

Some people prefer putting their money into saving certificates, such as those by BBK or Ahli Bank. Or perhaps stash some cash under the bed. Same idea. Just make sure you save up the same amount every month as soon as you get your salary, before you spend anything. If you keep it mixed in with your regular spending money, you'll probably spend it, even if you try not to.

With time, your money starts adding up, and you'll realize you've collected quite a bit, which you can either re-invest into something bigger, or spend on something you need (ie, car, deposit for a house, etc).

Of course, all of this is assuming we know how much we need for spending every month, or approximately what amount we want to save. We'll go over this in the next post.


Mahmood Al-Yousif said...

Count me in as the lead in this "impulsive personality" category Ammar!

How I personally gone around this is get whatever money I happen to have at that time, and use that as a down payment for a plot of land. This way, I get to forcibly "save" by paying off the loan and at the end of the period that plot of land would have appreciated somewhat so when I sell I get a nice profit on this forced saving scheme.

The trick is NOT to spend that money of course, but use whatever is necessary to tide yourself over but always put aside a good part of that sale for the next investment.

Hopefully in time that will create enough of a pension when I grow old and gnarly!

Ammar456 said...

Thats a good way of saving money. There of course, are a number of different ways, and hopefully i'll discuss them over the coming posts.

$iLveR GiRL said...

I am seriously in love with your money-related posts! I'll get myself a saving account during my lunch break, khalas!

Thanks for pushing me to doing it!

Blue Ice Envy said...

Now you're really getting my attention...

Blue Ice Envy said...