How to Manage Your Personal Finances Using the SAVE Approach

There are many personal finance advices out there promising people the rewards of financial freedom. But personal finance management need not be a complicated matter. You can be financially free using the simple SAVE approach. SAVE approach distills the wisdom of effective financial management.

What is SAVE approach?

SAVE approach is simply the acronym for time-tested principles of financial management that ensures financial independence to those who practice it. The principles of the SAVE approach are detailed below.

 - Spend less than you can earn. Many fail to recognize that the main reason why they could not make ends meet is their spending behavior. They tend to spend more than what they could earn. This is a matter of self-discipline -- spend only within the bounds of your income and you will be financially free. If you want to spend more to meet your needs or wants, then the only rational way to fulfill that desire is to earn more. Alternatively, it is better to save first before you spend. Allocate a certain percentage of your income for savings and spend what remains. This assures you of regular savings for future emergencies, future plans, or unforeseen needs.

  - Avoid buying unnecessary things. There are only a few things people really need to survive: to be able to satisfy their food needs (not indulge without restraint), breath fresh air, and drink clean water. And of course, people need an abode to shelter them from the elements and clothing to keep them warm. Aside from this, many of the supposed to be "needs" are, in reality, wants. And the more urbanized the place you live, the more things you need to buy or pay. Life in the rural areas is simpler, cost-effective, and healthy.

- Visualize your future. Consciously focusing on a future state of life, e.g. a lifestyle you yearn, will harness all your energies to reach that vision. Unconsciously, your brain will program your actions to meet incremental goals. If you plan to take a vacation in a place of your choice at a definite time, you will need to plan ahead and work for that vision. That will prompt you to  save or find ways to earn more. People with vision have a definite direction.

 - Extend help to the needy. You may be thinking "How can I extend help when I myself am needy?" The point here is that if you boost your income, and manage your finances well applying the above principles, chances are you will have the capacity to help others. Having a state of mind to help others will make you strive to be financially independent and get rid of your self-centered concern. 

Achieve financial freedom using the SAVE approach. Remember: 1) Spend less than you can earn, 2) Avoid buying unnecessary things, 3) Visualize your future, and 4) Extend help to the needy.