A Jamaican proverb says, “Save money, and money will save you.”
Does your saving really have the capacity to save you?
How can you save in a global economic downturn?
Can you really save when your income is not enough?
These are some of the questions that come up frequently when I teach personal finance classes.
Your savings is that part of your income that you have not spent. That is, it is the portion of your income that you do not immediately spend on necessities or wants. Money not spent now is money available for future spending.
However, the real essence of saving is not for spending to be deferred, such that the money is eventually spent, but that the money is totally taken out of your current or future expense buckets and into an investment bucket that has the potential to create wealth for you in the long run.
Your savings could also come in handy for meeting important and necessary obligations in the near future.
The path to creating wealth is interestingly simple, but one that takes time.
Earn a living/an income.
Spend some of your income.
Save the other part of your income.
Put your savings into viable investments.
Give it some time.
Invest part of the returns, or plough everything back into viable investment options and keep the cycle running.
Rinse and repeat.
Here are a few practical ways to develop a positive saving culture.
1. Treat your savings as a monthly expense.
Read that again.
Don’t save after you have spent on various things, but list saving as an expense that must also be provided for.
2. Learn to Save-Save
Saving is not only about putting money aside; it is also about cutting costs in areas where you could otherwise have spent more money.
If you had two expenditure options and you went ahead to purchase the cheaper one, you may put the extra amount you could have spent in your savings. It may seem inundating at first, but you can consciously put this into practice.
For example, let’s assume you need to make a decision to buy one of two brands of a TV set with about a N100,000 difference in prices. If you choose to go for the lower priced one, even though you could have afforded the pricier one, you can go ahead and add the N100,000 into your savings account. This means you have saved-saved.
3. Build consistency
Saving consistently over time is more important than the amount that is being saved, in most cases. If you are able to put huge sums aside as savings, it counts, as long as you don’t keep dipping your hands into it. Saving is however more effective, when you are able to put money aside consistently. Once you master the consistency part of it, you will be able to save more as you make more.
4. Take Control
There’s usually not a perfect economy in any country , so don’t keep using the state of your country’s economy as an excuse not to save. You don’t have control over how the economy runs, but you do have a bit of control over what you do with your income and expenses.
Life is full of risks, and emergencies don’t make announcements before their arrival. Having something kept aside will help you cushion the effect of unplanned expenses when they show up.
Indeed, money saves you from embarrassing situations, from being indebted and from not being able to meet your needs.
If you save money, money will save you!