If you’re a regular reader of this blog, you know all about the importance of saving money. But what are you saving for? The best way to save money is to use the power of three. This means that whatever amount you save (and the more you save, the better), it should go towards three things:
1) A type of financial wellness. If you are just starting out with saving, set aside one third of your savings each month and put it in an emergency fund. Keep doing this until you have three to six months of income saved. After this, choose your highest-interest personal loan, credit card, or personal debt and put your one third towards this until it is paid off. Continue until you are debt-free.
2) Long-term investments. One third of your savings should be put into long-term investments, such as a retirement fund, stocks, real estate, or something else that will protect you when you are elderly.
3) Medium-term savings. One third of your savings should go towards medium-term savings, preferably something you are excited about. Maybe you want to buy a boat, invest in a home or cottage, or take a trip. Start a savings account and start planning.