06 Apr How to save money consistently, every month
Savings are essential for a healthy financial life. Start small and build towards your goals.
Title: How to save money every month
When I started working, I was in my third year at University. I worked as a junior accountant in a family business. I earned a total of R3,500 per month! Although it was not a lot of money, for a student with little responsibilities, it felt like a lot!
Even though I did not have a grand goal for my money, I knew that I had to save, my mother had told me to! So from my little riches I started saving 10% (R350) every month and by the end of the year, I had a little over R4,200 plus a small interest I had earned.
You are probably thinking why I am telling you about my first job and what I used to make? Well, its because I often think about the lessons I learned from that experience about managing money and I often tell the story at my speaking engagements or workshops.
Can you save money? Is it easy to do so? The answers to the two questions are: yes and yes! You can save money and it can be easy to do so. Don’t get me wrong, I know our financial decisions are also informed by what’s happening in our lives, for example, if you have a big family to take care of or you are working and funding your own studies etc, there are many reasons why a lot of people cannot save.
Lessons from my experience:
- Just start, no matter how small / pay yourself first
Commit to putting money aside, regardless of how small it may seem. Not only will you be saving but you will be doing something that is much more important; you will be building the habit of saving. If you make saving a habit from when you earn a little, it will be that much easier to save once you start earning a lot more.
For you to start, you need to look at your overall budget and ask yourself – what can I cut back or how can I make extra money so I can start saving?
- Emergency fund
Having savings or an emergency fund provides a safety net. Without an emergency fund, you could find yourself having to use credit, which could be expensive in the long run.
Many experts will tell you that you need at least 6 months equivalent to your salary saved in an emergency fund, although this is true and logical, I always say start with what you can while you work towards the ideal goal. Have a number in mind, for example, this could be to at least have R10,000 in a flexible savings account for any emergencies. By having that amount, you will begin to feel a sense of security as you build to a larger amount.
- Pay off debt
The quickest way to save money is to try and pay off your debt. Debt costs money in the form of interest rate your lender charges you. The higher the interest rate charged, the higher the cost of that debt. Debt like a credit card, overdraft, store clothing accounts etc can be expensive. If you paid them off, you would have more money to save every month.
- Automate your savings
The best way to save money is to automate your savings. Treat your savings like you do your expenses. What do I mean by this? Just like certain expense go off your account via a debit order, so should your savings. On your Internet banking, you can easily put an instruction for money to go off your account into a savings pocket as soon as you get paid.
This ensures that you actually do save and takes the stress away from you of having to remember to do it.
Regardless of your situation, having savings is an important part of our financial lives and building the habit of saving, is priceless.
*This article was first written for African Bank