“I want to start saving, but I don’t know where to start!”
If I could have 1,000 bob every time someone told me this in real life and on social media, I would be an independently wealthy woman. This thought also features on my mind quiet often. How can I save more? Am I saving enough? Could I be saving more than I am? Thinking about saving is one thing, doing something sustainable about it is another matter entirely. Ever thought to yourself, “How do I start saving?”, only to realize you had the exact same thoughts 6 months ago?
Why is this the case?
See saving money is not intuitive, it is not in our nature. When someone tells you to save, they are telling you to forgo certain, immediate consumption, for an uncertain future. There’s no immediate motivation. Why should a 20 year old forgo a “good life” to save for retirement? How do they know they’ll even be alive that long? This counter-intuitiveness in saving and other self improvement activities such as exercise means that we have to plan and have systems in place so that we do not have to think about it every time. Because if we keep thinking about it, we will not get anything done long term. Short term pleasure will always win.
We start by looking at how much we should save
There is an unofficial agreement that everyone should save at least 10% of their gross earnings per month. This is a good start if you have not been saving at all. Why 10%? It’s a nice and round figure :D, but also, forgoing 10% of your earnings will not result to a significant decline in your standard of living.
A good way to test this is to transfer 10% of your earnings to another account once your paycheck comes in, and to plan to spend the 90% only. I bet your life will not change much. You will not go hungry, neither will you fail to go to work because you didn’t have bus fare or fuel. You will probably be a bit conscious about impulse spending, and this is what our goal is here.
“I have no money to save, in fact my month is longer than my expenses”
When someone tells me this, I ask to see their budget. In ALL the cases, they do not have a budget, and they do not track their expenses. The question then is, if you do not have a plan for your money, and you do not know where the money goes, why is it surprising that it is never enough? Track your expenses for a month, and use the data you get to come up with a budget, and to also evaluate your spending habits to see areas you could reduce your expenses.
The thing to look out for here is the procrastination trap, where you purpose to track your expenses, fail to do so, and 6 months down the line you are still planning to track, budget then save. My advice is to go with what I advised above. Start saving “cold turkey”. Take out that 10%, work with the rest. If your budget has slack to save more, add the amount to your savings. If after expense tracking and budgets you still find yourself dipping into the 10% saving, then your lifestyle does not match your income, adjust to live within your means.
Have a system in place
Remember what I said at the start. Saving is not intuitive. Our brains do not like to save money, spending it is more pleasant, fun and in tune with human nature. So you do not want to have to think about saving every month. Set up a standing order from your account to your savings account. Let the system do the thinking for you.
Do you have 2016 savings goals? What is your strategy to ensure that you stick to your goals? Let us discuss in the comments section below. In the next post, I launch an exciting savings challenge!
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