You can earn money in the world and but if you do not save any of it you will not be able to reach your financial goals to build wealth, and if you can't save you won't be able to invest so you can't grow.
HOW DO YOU SAVE YOUR MONEY
Spend less money than you make, that difference is called saving money, but easier said than done. It's hard to spend less money than you make when you don't know how much you spend that's where budgeting comes in.
BUDGET - it's a spending plan for your money, forming categories in a budget: YOUR NEEDS, YOUR WANTS, DEBTS and SAVING INVESTMENTS. There are many different budget templates out there and there are many different ways to track your budget, one of the easiest ways do your spending on accounts that has money managing and budgeting tools.
once you start tracking your spending you can see where all your money goes, so you can try to decrease this category to increase your savings. Another sneaky but effective way to save money is by PAYING YOURSELF FIRST, as soon as you get paid put your money into savings and spend the rest, if you do the opposite get paid, spend money and save what you have left you might find yourself saving less, so pay yourself first, if you happen to have money left after your spending save money more .
To make pay yourself easier make it automatic, you can set your account when you get paid money will automatically transfer from your checking/transactional to savings account, and speaking to savings accounts you want to try earning the best interest rate that can beat the inflation rate of that county you're in. INFLATION- is the cost of goods and services increasing year after year.
WHEN TO SAVE AND WHEN TO INVEST
Savings can be reserved for emergency fund and short- term goals, with any long- term goal like retirement or your children education, long term investing would be better option because of better returns this is where RISK TOLERANCE comes in.
Let's say you plan to buy a house, if you can save for a house for 2 years, this would be considered as short terms savings, now if you need 5 years to save for a house this would be considered as long -term savings. Is more reasonable the long- term savings invested because if anything happens in STOCK MARKET like a global pandemic you will have time to recover so you don't occur a loss. For emergency fund you need to save at least 1000 Dollars or 100,000 kenya shillings depending on your monthly expenditure, then slowly build up the emergency fund of 3-6 month, the recommended is 12 months of living expenses.
The amount of your final emergency fund would depend on many factors like: your line of work, how easy it would to get a new job if you lose your current one, how healthy you are you might unable to work because of health complications, how mat dependent you have, someone with 5 kids will need a way bigger of emergency fund compared to someone with less kids or no kids. But don't get too carries away savings because savings don't earn a lot and you will lose value of your money due to inflation rate.
