“Do not save what is left after spending, but spend what is left after saving” – Warren Buffet
This was the words of the fourth wealthiest man in the world and it’s definitely worth emulating. The significance of saving money can clearly not be disputed. Saving money is a habit we all need to develop, but we don’t as it doesn’t give us that immediate gratification spending does. Saving money is a basic aspect of financial fitness and an important step towards financial freedom.
Saving is hard. Agreed. It takes a degree of discipline and a great deal of sacrifice. Most people save for different reasons such as, saving for a wedding, a car, traveling, education, a house, etc. Overtime, developing a good savings habit will prove to be far more effective as well as rewarding. This article seeks to explain how to develop a healthy savings habit.
But before then,
here are important reasons for you to save money:
- Save money for an emergency
- Save money for financial freedom
- Save money for retirement
- Save money for financial security
- Save money for personal development
- Save money to invest
Saving money helps you take calculated risks
Steps to developing a healthy savings habit
1. Evaluate your financial wealth
This is the first step towards building a healthy savings habit. It is important as it gives you a direction and what to do to get there. You have to have a clear picture of your income and expenses; you need to know what you spend your money on, understand why you do and whether you’re spending more than you earn. Once this is done, you can move over to the next step.
2. Start with the goal of saving for emergency
Financial experts have advised that when starting off, you have to choose to save a specific amount for bad times or rainy days. The notion behind this idea is that forming and achieving a specific goal is an essential early step in habit formation. The amount you save for your emergency fund may vary. Experts advise saving at least eight months worth of living expenses.
What is more important is setting a target amount and then saving towards that target amount. You can only form new savings habits when you adopt particular behaviour patterns and the motivation to achieve your own specific goal.
3. Set achievable saving goals (Daily, weekly, weekends etc)
In order to form a habit, the targeted behavior must be repeated regularly within the specific context. Consciously and constantly having in mind you are to save at a particular time is crucial to forming a saving habit.
For instance, if you’ve made it a target to save ₦10,000 weekly. Before the end of a week you would be aware you are to save again the following week. Your mind becomes conscious to the fact that you’re to save that ₦10,000 weekly. It then becomes a habit, if done repeatedly, regularly.
Put simply, the moment you make your money saving decision, at whatever time, the sooner you will begin to shift your mindset towards forming a saving habit.
4. Reward yourself for attaining small milestones
Saving money is important, but it is also important to find ways to keep yourself motivated. This can be achieved in different ways. Some people reward themselves, by making the amount they’ve saved visible. This can be properly explained in this context,
Let’s say you’ve been saving for a year at a dedicated time in a piggy box or through another avenue. But you haven’t been keeping count of the total amount you’ve saved. Once you know the total amount, and it is huge – relatively, you can be motivated to save more.
Also, some people also give themselves small treats to motivate themselves to save more. It varies according to the individual.
5. Ensure you spend less than you earn
The number one reason why people find it hard to save is that they live beyond their means. Hence, in order to develop a healthy saving habit, you must regularly spend less than you earn.
This can be achieved by creating a budget and sticking to it. By having a budget, you would be able to prioritize your needs and wants and have a clear picture on how to decrease spending on your wants. Always acting on your wants would make you unable to save.
Concluding How to Cultivate a Healthy Savings Habit
The importance of saving money is simple: it gives financial security to your life. Want to start that business and you have capital issues? Want to invest into that seemingly profitable venture but have no money? The answer is saving towards it. Saving money is a healthy habit which must be nurtured and maintained.