A life-lesson that has been repeated over and over again and often drummed into our heads is ‘saving for the future’. In fact, my mother’s incessant lament over the years when I was growing up was that “money burnt a hole in my pocket”.
With the glamour (or what I thought was glamour) of my first job directly out of school (in the gap year before university), I spent my monthly income lavishly – on clothes, accessories and treats for the family. I did not think much about my life ten years down the line. For the moment, I was 18 and had financial freedom!
However, as my late 20’s approached and the prospects of marriage, family and responsibilities loomed, my parents’ advice about saving rang loudly in my ears. They had saved for me, and now it was my turn to carry the torch: either for myself should I choose to remain single, or for my family if I decided to start one.
Approaching the world of saving so suddenly and blindly filled me with trepidation. I needed a plan (why didn’t school prepare us for these things?) and it needed to be practical. It was not the age of Google and the internet back then, and so I sought financial advice from anyone in the know. Not all of it made sense, but thankfully, I was able to follow through for the most part. Now, however, the world wide web with its universe of resources and technology and its new-age apps makes saving and understanding how to do so a great deal easier. Let’s look at some tried-and-tested strategies to saving that anyone can adopt.
Saving made easy
1. It doesn’t take a genius to figure out that the first step on this list should be to set targets for saving. Experts say that in order to save, we must envision what we are saving for, be it a house, a car or a retirement fund. This means ascertaining how long you have to save the necessary funds and how much you will need to save each month to reach your goal.
2. Keep track of your expenses. You can use an app, Excel sheet, or even a normal notepad to record how much you spend each month, even on the minutest things. This will enable you to reasonably assess how much you can save each month and also help you with advice no 3.
3. Determine where you can cut down costs in your life. If you can cook at home instead of eating out, then do so. If you can save on fuel by carpooling then get onboard with that. If you can reduce your electricity bill by installing solar power then make that decision. Yes, you might be spending some money in this latter option, but you will soon see the returns rolling in.
4. Stay out of debt, and if you are in debt first remove them. Saving is important, but what takes precedence over that is not owing anyone any money. Always ensure that credit card bills are paid before you save money each month. It will not be very helpful if your name ends up in the CRIB (Credit Information Bureau) as your debts accumulate.
5. Find the best type of account or accounts to save with. Today there are various financial institutions that offer myriad accounts that yield different rates of interest. Sometimes Fixed Deposits can yield more interest than Savings Accounts. However, keep in mind that FDs require a greater commitment in terms of time than Savings Accounts do. Do some research- speak to a host of banks and institutions before you decide where to put your money.
6. Experts also suggest that you look at your spending on ‘annual’ terms. This means that you need to calculate how much money you spend on certain things like regular visits to the movies. When this adds up for the year, you are hit with the cold, hard reality of the downside of your indulgence.
7. Have a ‘no spend day’ each week. This doesn’t necessarily have to be one designated day every week because we all know that expenses suddenly crop up with no warning. Instead, try not to spend any money on one day each week. You will find that when you postpone spending on certain needs by even a day, the need goes away completely or becomes resolved on its own.
8. Budget for emergencies in your savings. What this entails is that you save a little more than your assessed target each month so that you have a little extra in case of a ‘rainy day’. Ideally, this should go into a different account that you vow not to touch unless that emergency comes along. For instance, you can never know when your employment opportunity may hit a snag due to financial crises faced by the company you work for. Having an extra bit of savings will weather you through this unforeseen problem until you find new employment. And this way, even after you get back on your feet you still have your savings to keep your future goals on track.
Be smart about it
One golden rule to follow in all this is to start saving early. This obviously leads to more money in your savings portfolio, which will further increase as you obtain promotions at work and earn higher. Furthermore, if you start saving before your 30s when you are single, later when and if family and other responsibilities increase, you will certainly have more money saved for your goals and even that anticipated rainy day.
Finally, also remember that if you decide to share your life with someone along the way, do not compromise on your savings plan. Get your partner on board as well. However, keep your individual savings separate just in case you decide to go your independent ways somewhere down the line. But it is essential that you both save.
(Anouk De Silva)