Question #2:
“What’s the best way to save but still feel financially free?”
Dear D,
Assuming that the answer that you’re looking for is not, “spend somebody else’s money”, the way to do this is to do something called “Pay Yourself First.”
A lot of the time, we think of savings as something you do after your other monthly expenses. Paying yourself first means that putting money aside before you spend money on anything else. (If you don’t make enough money to cover all of your expenses, doing this will be almost impossible, and that’s okay to admit. Read on for future you!)
Practically, paying yourself first means that some of your money is deposited into your savings account directly, and before you pay bills or spend money on other wants or needs. You can do this either via direct deposit, or an automated transfer to savings, so that you don’t even have to think about it. For example, if your goal is to save $10 per month, you can set up an automatic transfer on the 1st of the month for $10. If you have big goals, you can break them up into smaller ones, so if you wanted to save $500 per month, you could put aside $250 on the 1st and the 15th, or $125 every week.
Speaking of big goals, if you’re just starting out savings, start with small amounts so that the money that you have left to live off of doesn’t feel like a shock to your system. Chances are, you won’t notice $10 or $50 or $100 less from your paycheck (pick the number that works best for you based on how much you make), so start with that, and increase your amount saved slowly over time until you get to your desired savings rate, or as close to it as you can afford to. So, you can start at 1% savings, and move up by 1% every month until you get to 15%, if that’s your goal.
And yes, you should have a savings goal. What are you saving for? A special event? In case of emergencies? A large purchase? Something else? Having a clear idea of what your goal is will help you figure out how much money you need to save, and how long it will take to get there. Even if your reason for savings is to have something extra in case something comes up, you should come up with a number that would make you sleep well at night, or a percentage of your income that you’d like to save. It could be $1000, or one month of expenses, or 10% of your paycheck, but figure out what it is, and then slowly start routing that money into savings.
Your savings should go into a separate account from the one that you use for the rest of your expenses, so that you don’t think of it as money that you have to spend. This could be that you have a separate savings account from your checking account at your bank, or you open up a savings account at a different bank entirely. If you can, you should put your savings into an account that will give you as much interest as possible, such as a high yield savings account at an online bank.
Savings is a really slow process, which can sometimes feel frustrating when your goal seems so far away. But the upside is, if your money goes to savings for all of your big things coming up in the future, you can spend freely with what you have leftover after bills, because future you is all set! That’s the way to feel financially free. It’s really nice to pay your bills and have money leftover with which you can do anything you want.
