Developing the Saving Habit
Imagine this. Your salary just got credited to your account, and even before the thought of getting yourself the AirPods you wanted for so long crosses your mind, your dad asks you to start saving for your retirement. Most of us have experienced this, and while it can be irritating at times, there is a lot of wisdom hidden in it. Because when our dad asks us to save, he does not want us to stop spending on ourselves. All he wants us to do is keep a portion of that money with us to spend in the future.
However, try as we might, something comes up. Something always comes up. Everything from subscriptions dues, fees and fines to insurance premiums and loan instalments suddenly become due the minute the salary is credited. Uncanny as it seems, it is a problem all of us face in this fast-paced, highly competitive world. So this new year, how do we make a resolve to save as much money as we can without succumbing to our emotional impulses? Let us find out.
Saving money is not an easy feat to achieve, thanks to inflation. However, it is not a herculean task as people make it out to be. All it takes is consistent effort and a rock-solid plan.
- Set a realistic goal you can achieve. Making something work is never possible without a goal in mind, and the same goes for saving. Think of a purpose for saving money — it could be for the AirPods we mentioned earlier or something else. To make it easier, break the goal into even smaller targets. Setting a realistic goal will help you stay focused and motivated on the long journey you are embarking on.
- Keep a record of your expenses. If you want to save money, you need to know where you are losing it first. Keep a record of the expenses you incur. This will help you understand your financial position and identify potential leakages where you waste money.
- Get rid of unnecessary expenses. Now that you have noted all your expenses, it is time to identify ones you can live without. Cut down on fine-dining expenditure, movie tickets, unused subscriptions and anything else you do not deem necessary.
- Assign yourself a budget. After figuring out your goals, incomes and expenditures, it is important to create a budget for yourself. Sticking to this budget at all costs will help you strategise the way you spend and limit overspending in the long run. Once the budget is in place, it becomes easier to follow a routine and stick to the guidelines provided by your budget.
- Give yourself a treat every now and then. If you have reached this far, you have already done a lot. It is important to reward yourself for every milestone you achieve. Conversely, it is equally important to punish yourself for missing targets. Establishing this punishment-reward system will prevent you from becoming careless and will keep you motivated.
- Save your money where it makes you more money. Saving money by itself is not enough. The goal is to make it grow. Invest your savings in assets that align with your financial goals and watch your money do the work for you. Seeing your savings multiply will encourage you to save even more because obviously, who does not like the extra money?
- Think before you spend. Every time you are out to buy something, stop to think if you need it. It will help you become conscious of the expenses you incur. Controlling your impulses is an important part of adopting new habits, so make sure your efforts are consistent throughout.
Now that you have understood how you can develop the all-important saving habit, let us figure out why saving is important in the first place. An inherent part of human nature is our need for instant gratification. This is what is behind the “why do I need to save for the future, when I want to live in the present?” question we’ve all asked ourselves one too many times. Nevertheless, an essential part of growing up is realising that future-proofing is needed just as much as having a good time.
You will want to have some money set aside for when you want to buy an asset, or purchase the last in-stock piece of the Death Star Lego set, or even take a day off and go on a shopping spree. All of these activities are dependent on the money in your pocket and will be impossible to enjoy if you’re out of cash. Lastly, while savings are necessary for sustaining day to day financial decisions, an emergency fund is supposed to keep you afloat in times of crisis.
Remember, it’s never too early or too late to start saving, but the earlier you start, the better your finances will be. Starting young will also allow you to tap into the usually overlooked potential of compounding. To start saving, all you have to do — is set an objective, minimise unnecessary expenses, and before you know it, it becomes a habit.