If you ask most people why they do not save, the go-to answer is that they don’t have anything left to save. They then go ahead to say that they will start saving when they get more money coming in. The hard truth is that if you can’t save when you have a smaller income, you will not save when you have a larger income. The reason for this is because you have not inculcated a saving culture in yourself. Culture is something that you do consistently and it becomes a part of you.
You may be wondering why it is necessary to develop a saving culture. Well, some of the reasons include;
Where do you start?
Now that you know why saving is important, you may be wondering how exactly to develop a saving culture. Where do you start? One thing for sure is that forming a saving culture is not easy as it requires determination and consistency. However, here are some simple steps that you can follow to help you create a saving culture;
Step 1: Assess your fixed monthly expenditure
These are expenses that are a must every month such as rent/mortgage, food and shopping, transport/fuel, electric bill and water bill among others. Write them down in a book or on an excel sheet alongside rough estimates of how much these expenses are.
Step 2: Record your daily expenses through an app
The second step is recording your daily expenses preferably on an app. There are many personal financial management apps like Finance PM that are free and easy to use. The reason for using an app is so that you can automatically generate reports which will help you identify where exactly your money goes each month. Do this for about three months so that you can take note of your spending habits.
Step 3: Evaluate which expenses to cut on
The next step is cutting on unnecessary expenses. Using the data you have from the app that you chose earlier, you will see what you have been spending on. Once you analyze these expenditures critically and objectively, you will notice items that you can do without or you can cut down on.
Most of these items are luxury or leisure items that you don’t necessarily need. You should keep in mind that saving means foregoing some items.
Step 4: Create a saving goal
The next step is creating a goal. What exactly are you saving for? How much does it cost? Basically, it is writing down how much you need, by when and for what. If possible, you can create a simple vision board with pictures of what you would like to achieve and place it somewhere you will be able to see it every morning. This will help you visualize and keep you focused on the goal spending first.
Step 5: Save first then spend
A key thing to note when saving is that you don’t save what is left but spend what is left after saving. Saving comes first before spending. You should keep in mind that what you are earning is what you get after all statutory deductions and savings have been removed. If you are saving for retirement through an employee pension fund, it is usually deducted from your gross income hence it is easy. However, if it is through an individual pension plan, you may also want to set it up, in the same way, to make it easier.
To make it easier to save, you can request a standing order with your bank such that a certain amount is transferred to your retirement savings account and another amount to your general savings account each month. This will eliminate the temptation of spending first. Matters that need money are guaranteed to always come up but either way, do not dip into your savings as it is a slippery slope.
Step 6: Get an accountability partner
Having someone who you can be accountable to regarding your savings is important because they will help you maintain your focus. This can be your spouse, friend or even a family member.
Step 7: Monitor your progress
Lastly, you need to monitor your progress through milestones. For example, if you are saving up to buy a car in the next two years, you can check every four months whether you are on track or not. This is important because it will inform you whether you need to save more or add on an extra income stream to help you get there faster.
With this, you are well on your way to achieving great things. Remember that inculcating a saving culture is a long journey and it begins with one step. The earlier you begin, the more you can achieve. It is also important to inculcate this saving culture in our future generations. Start teaching children at a young age, the importance of saving and lead by example.
To learn more about how to save for your future and earn interest with Mwavuli, reach out to us.