Savings Culture
By definition, a savings culture is the act of developing a habit of saving. To build a savings culture one needs to first understand that saving is not done because one has enough money but because you are willing to forego you current wants for a greater calling or future goals. You might wonder why talk of savings during this harsh economic times? Savings creates a buffer for you in case of any uncertainties for a rainy day. let’s shift gears a bit, if you lost your job today what could you live on,considering the bills and all? You get involved in an accident, God forbid, how will cover medical expenses? What will you live on during your retirement? That vacay dream, yes to your favorite travel destination, how are you going to achieve it?
Understanding your finances is more of journey than a destination. A Salary increments or more income does not translate to you saving more; in fact, it could mean more spending if you are not prudent. An example of this is an increase in your monthly income may result in you moving out to a bigger house, eating out more often, upgrading your phone and hanging out in more boujee joints. We have over time raised excuses as to why one cannot save even after having so much money. Some of the reasons are;- saving is for the rich, I do not have a regular income, you save your excess income after expenses, I’m too young to start saving just but to mention a few.
Building a savings culture is crucial in the modern world as it will help you in realizing your financial goals. The current culture encourages spending, and this is wrong. Savings is important since it gives you a buffer for unforeseen event in future. Lack of financial discipline results in one spending more than you make and often led to getting debt to keep up with a lifestyle. Savings can be a tool to unlocking your financial freedom
How to start a saving culture
1. Save before you spend
You should always set aside a certain percentage of your income for saving as soon as you receive an income. Savings is not a factor of what you are left with after sorting your expenses, that’s if you will have any money remaining at all. The truth is human needs are elastic and infinite,When you meet one need, other new ones arise. When man meets his basic needs,the struggle for comfort and luxuries persists. i.e, You first want a car for mobility,after you get the car you now want to upgrade to fast and flushy car model and the needs go on
You might ask “what percentage of my salary should I then budget to save ?” Before we answer that lets answer this first “what are your goals?” The rate of the amount you save is dependent on your specific goals and timelines for goals but its recommended that at least 20% of your income should go at savings
2. Set financial goals
You should set financial goals that you want to achieve and actively save towards them. An example of such goals can be a phone goal, retirement goal, emergency fund or even a vacation goal. As you are setting your goals you should ensure the goals are SMART. S.M.A.R.T meaning your goal should be;- Specific, Measurable, Attainable, Realistic and Timely. SMART goals maximize your implementation intentions effect for your to easily convert your intentions into actions
3. Start small
They say a journey of a thousand miles begins with a single step. The first step towards saving is to start small from where you are and with what you have. There is a misconception that you can only save large sums of money but that’s not true. You can save as little as 5 bob from your daily groceries or shopping change. In the book “Compound Effect” by Darren Hardy highlights the importance of doing something small but consistently over a long period of time. The book illustrates why, small increments, can have tremendous results in your life. We often overlook small and seemingly insignificant pursuits for the big, lofty goals. The truth is, there’s no magic bullet or get-rich-quick scheme. Rather, just consistently show up each day, do work that will largely go unnoticed, until one day, that materializes into your “overnight success story.” The compounding effect is as true as on investments as is on savings
4. Make savings fun and engaging
Savings is often seen as boring chore and that’s why most often that not you forget to commit to saving regularly. This is partially attributed by the fact that existing saving channels do not have engaging enough user experiences. However, of late there are new emerging savings methods that are more engaging. i.e, #52WeeksSavingChallenge is a challenge that strives to make you save every week for the 52 weeks in a year. In most instances you start by saving a 100 bob on week one and increasing every week with that amount.(See attached chart on #52WeeksSavingChallenge courtesy of rookie manager)
Another way to make savings more engaging is to forming a saving group with your peers, where everyone will be serve as an accountability partner to each another. You can take it further and create a reward system to promote a savings culture. i.e, once a member hits his/her saving goal you take them out for a treat lunch or dinner
5. Automate Saving
If saving has been a challenge and you lack the discipline to do so , you can consider automating the saving process whereby the saving amount is deducted from your income as soon as it hits the account. Automation enables you save without you have to think about it. You can set up your bank account to automatically transfer funds from your checking account into a savings account every month. Or, set up your direct deposit to automatically transfer 10% of each paycheck into your savings account.
In as much as saving requires strict discipline, it is important to understand that no progress can be made without understanding dynamics that involve finances and money. Savings culture is a process that is achieved gradually in stages and cannot be attained in one move and is best to start practicing it now.
Resources
Link to book “The Compound Effect”
https://amzn.to/2EhNsiM
Link to article on “Implementation Intentions”
https://www.researchgate.net/publication/290193001_Implementation_Intentions
