Monday, April 4, 2011

First rule to save money: Thou shall pay yourself first

How to save money? There are many tips to save money out there. But one of them shines out of all. Anyone who is serious about saving money shall pay himself first. What does this mean? This means when you receive your salary (or any income), before spending a single cent from it, remove a predetermined percent out to a savings account. This is exactly the opposite of majority of savers do. When they get their salary they spend it first and then try to save the remaining portion. It is not a surprise when they have little or no money left  to save.

OK, this golden rule is over depicted everywhere and you can find it in any money saving tips web site. But here, I will explain how you can practically pay yourself first in Singapore, even if you do not have the discipline to do so. There are bank accounts in Singapore offered by several banks and are designed to realize "pay yourself first" rule.  These regular savings plans offered by local banks automatically channel your money to another account.

MySavings Account, offered by POSB comes with an automatic monthly savings feature. You choose an amount between $50 and $3,000 Singapore Dollars and a savings date between 1st and 25th of the month, and the savings will be made automatically each month.

MSA123 from OCBC offers you to start a savings plan to save a fixed amount every month according to your needs and earn fixed interest rates. You can choose to save in a 13-month, 24-month or 36-month plan.

How much money you should save? First, you should not target absolute values but percentages to have a successful saving habit. Instead of having a target like $500 per month you should have targets like 15% of your income. If you do not earn much start with small percentages and increase it as your income increases. %10 percent is good to start with and as your salary increases aim 25%.

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