What is Saving?, What is a Budget?, How to Manage It?
What is Saving?, What is a Budget?, How to Manage It?
In its simplest definition, savings is defined as the difference between income and expenses. When the definition of savings is approached in more detail, it can be explained as the part of disposable income (remaining income after taxes are deducted) that is not used in consumption.
In general, saving is the act of postponing consumption that can be done in the present to a future date. It is possible to divide the term savings into different categories: private and national savings. Private savings consist of household and company savings. Household savings can be expressed as the remainder of disposable income. Household savings are important for individuals to ensure their financial freedom, create passive income, be resistant to financial risks and increase their level of welfare. Individual savings; It can be affected by the income level of households, interest rates and individuals' expectations regarding the economy. Company savings can be briefly defined as the amount remaining from turnover, taxes, expenses, dividend or dividend payments. National savings are the remaining amount after subtracting the part allocated to public expenditures from tax revenues.
All private and national savings items represent a country's total savings. The ratio of total savings to national income shows the savings rate of the relevant country. A high savings rate increases the growth potential of the economy and contributes to the country reaching the targeted level of welfare, as well as supporting the reduction of external financing dependence and ensuring economic stability.
On the other hand, the low savings rate causes capital deficiency and increases the country's dependence on foreign savings to provide financing. In periods when capital inflows accelerate in an economy with a chronic savings deficit, there is a tendency for the national currency to appreciate, an increase in household consumption, a negative impact on exports and an increase in imports, a change in profitability and competitive conditions as a result of a decrease in the investments of companies with limited external financing opportunities, and the direction of capital flows as a result of an increase in the current account deficit. The possibility of change may result in increased fragility in the economy.
However, savings can also affect interest rates in the relevant economy. When an economy saves enough, interest rates tend to decline. At the same time, rising savings may also affect inflation; because more savings can function to keep inflation under control by limiting demand (spending).
For households, the first step towards financial freedom is saving. Allocation of savings to instruments that will provide passive income can increase the welfare of individuals and also ensure their resilience against financial risks.
There are differences between investment and placement definitions in terms of allocation of savings. In order for an accumulation to be considered as savings in the economics discipline, it must be in a structure that can be a source of any capital (deposits, etc.), that is, it must be included in the financial system. In other words, deposits are accepted as savings because they provide resources for economic actors who want to use loans. On the other hand, savings that cannot be included in the financial system and cannot be used in any investment or production activity (under the mattress, etc.) are not defined as savings in the economics discipline. Contrary to what is used in daily language, the allocation of savings to capital markets (stocks, bonds, etc.), in other words, the allocation of money to a security or security that provides a return, is defined as placement. On the other hand, the concept of investment in the economics discipline represents the use of resources to increase production capacity.
How to Save Money?
Savings are the part of disposable income (income remaining after taxes are subtracted) that is not used in consumption. In other words, it is the postponement of consumption to a future date. In the simplest terms, savings can be made by reducing the share of consumption in disposable income.
The first step to saving or saving is to create a budget. The budget is the balance sheet that will show your income and expenses, in short, your financial situation. In addition to budget and budget tracking, setting a motivating goal is also important to save money. Rational, achievable savings goals can provide discipline for saving. On the other hand, you should prioritize paying off your existing debts, if any, and avoid new debts. Since debt also means interest payment, it is a factor that reduces the amount to be saved. However, you can both increase your passive income and reduce your risk by allocating your savings to different instruments or simply diversifying them.
A personal budget is a balance plan based on individuals' income and expenses. In other words, it is a table that briefly shows your fixed income and expenses and your financial situation. Creating a budget can help you take control of your finances, build savings, and reach your financial goals. The budget may vary from person to person, time and circumstances.
The purpose of preparing a budget is to determine income and expenses. Tracking expenses allows you to control your expenses. In this way, you can observe which expenses are needs and which are wants. When creating your budget, it is important to determine your priorities. If you are creating a budget to save, you can determine in which areas you need to restrict spending and spend in line with your income. After determining your income and expense items, your budget; fixed expenses (basic needs), wants, savings and debts, etc. Dividing it into categories will ensure budget discipline. Once you define the categories, you can set weekly or monthly limits for each. In this way, you can increase your motivation to stick to the budget by both saving and creating resources for your wishes.
