The importance of saving has often been emphasized primarily in relation to rainy days. The idea is that saving allows you to survive financially during challenging times. While this is true, it’s not the only reason why saving is important. Personally, I find saving more motivating when I’m saving to acquire something rather than just saving for unforeseen emergencies. This is because having a specific target or goal gives me a sense of purpose. When saving to invest or acquire something, I have a clear objective in mind, whereas saving for rainy days doesn’t provide a specific target. After all, how much do you really need for those rainy days? You can’t accurately predict the severity, impact, and duration of such events.
When it comes to preparing for rainy days, I prefer to adopt additional strategies such as having a side hustle and acquiring insurance. I believe these two approaches are more effective in supplementing savings than relying solely on them. While it’s still crucial to have some savings for minor setbacks, having additional income streams and appropriate insurance coverage can be invaluable during major financial storms.
However, as we discuss the importance of saving, it’s crucial to address the challenges that many people face, challenges that are often overlooked by social financial influencers in their money wisdom.
The Challenge of Affordability
The first challenge many people face when it comes to saving is that sometimes they simply can’t afford to save. Let’s be honest, some individuals can’t spare any money from their current salaries. I’ve been in that situation myself, and I understand how difficult it can be. It’s easy for others to say, “Even if it’s just R50, save something,” but when you’re the person who needs that R50 and more just to get by, such advice isn’t practical. Some people need every cent of their income to cover their basic survival needs, without even touching their wants. It doesn’t even cover all their crucial needs. So, how do you advise someone in this situation to save even a small portion of their income when they need every penny to survive?
To individuals facing this challenge, my advice would be to focus on personal growth. Look for opportunities to learn more and improve your skillset, which may lead to better job prospects or income-earning opportunities. These individuals don’t need saving advice; they need guidance on personal development.
The Challenge of Habits
The second challenge, which I’ve experienced myself and believe derails many from the habit of saving, is that we are often not told that when we start saving, it’s not about the consistency of the amount we set aside, but rather the consistency of actually putting an amount aside. Let me explain further. When I started my saving journey, I had a tendency to dip into my savings whenever a need arose. Many people, I can guarantee, do the same. I would save some money and then, after a week or so, withdraw that amount.
Doing this made me believe that I couldn’t afford to save, even though I could see on paper that I could actually set aside a portion of my income. So why did it seem like I couldn’t afford to save? It was because these weren’t real needs; they were merely habits that needed to be broken.
To overcome these habits, based on my personal experience, it’s important not to get discouraged when you withdraw from your savings. Instead, keep saving the same amount every month. What I have noticed is that as long as I continue saving that amount consistently, I begin to develop discipline. In the following months, instead of withdrawing the entire saved amount, I only withdraw half of it. As the consistency of saving continues, I find myself withdrawing less and less from the amount. After a few months of maintaining this consistency, you reach a point where your saving habits replace your spending habits. To your surprise, you realize that you didn’t withdraw any amount from your savings that month. Once you reach that point, you’ve truly mastered the habit of saving.
I still remember the month when I didn’t withdraw anything from my savings. I felt a sense of happiness, positivity, and pride in myself. It had been a long journey, but it was worth it, and I was proud that I never gave up, even though it may have seemed like I was merely playing around. Unfortunately, I had to learn this through experience, as I have never heard any financial advisor highlight this challenge. All I ever hear is that you must save.
I’ve learned that, just like spending, saving is a habit. It’s not just a financial plan; it’s a lifestyle habit. As they say with habits, it takes at least 21 days to form new ones. However, you don’t get paid every day; you get paid once a month. This means you’ll have to give yourself 21 months to develop the habit of saving. That’s almost 2 years. The key here is to consistently set aside the same amount every month, regardless of how much you withdraw. Keep saving, and eventually, you’ll notice your spending habits gradually diminishing.
Setting Targets and Defining Intentions
Setting savings targets is also important. Every year, set a savings target. But if you’re like me, a novice in financial management, don’t expect to achieve your target right away. Instead, challenge yourself to save at least 75% (this is just a random estimation; you can adjust it to your own financial planning) of your target. By saving the same amount every month and multiplying it by 12, you can determine your target savings amount. Then multiply that total by 0.75 (or any percentage you prefer) to see how much you should challenge yourself to save.
This approach will help you monitor your habit of dipping into your savings, knowing that you can’t afford to withdraw more than 25% of your target, or else you’ll fall short of the challenge.
Another factor that helps you stay on track with your savings is having a clear reason for saving. Ask yourself, why are you saving? Beyond just preparing for rainy days, what is your purpose for saving? That reason becomes the driving force behind your savings journey and keeps you motivated. Personally, I realized that because I dislike buying things on credit, I made it my mission to purchase everything with cash. However, this led to draining my monthly income on immediate expenses. I would spend all my cash and be left with nothing in my bank account. I realized that this was not a sustainable way of living. So, I had to learn patience and discipline. I had to resist buying things I wanted immediately and instead save up to purchase them. Part of my savings now goes towards buying things I need with cash. This approach requires patience and discipline, but it also allows me to live comfortably throughout the month, without the fear of unexpected expenses draining my resources.
Allocating Your Salary
Finally, let’s talk about the amount you should save from your salary. This depends on your financial goals and needs relative to your income.
I personally follow a formula of 65-20-15 rule. According to this guideline, 65% of your net income should go towards your expenses, 20% can be allocated for wants or enjoyment, and 15% should be saved.
It’s important to note that none of my advice should be considered professional financial advice. Please follow it at your own risk or seek guidance from a qualified financial advisor. My intention is to share my personal experiences and help you overcome the challenges associated with saving.
In conclusion, developing disciplined saving habits takes time and perseverance, but the rewards are worth it. By setting clear savings targets, establishing a purpose for saving, and gradually building up savings, you can gain control over your finances and work towards a more secure future. Remember, saving is a habit that requires dedication and commitment, but with determination and the right strategies, you can achieve your financial goals and enjoy the benefits of a healthy saving mindset.
