Saving is a habit that you can develop over time with a bit of effort, discipline, and commitment.
Not everyone is a natural saver or inherently astute with numbers. But, as with most things in life, saving is a habit that you can develop over time with a bit of effort, discipline, and commitment. The habit of putting money away to successfully grow your wealth begins with a healthy mindset towards finance, and in this article, we explore ways to create a healthy savings mentality.
Remind yourself why saving is important to you
Saving for the sake of saving is not likely to keep you motivated. Be intentional and specific about what you intend to save for. If necessary, develop a vision board on which you can place visual reminders of exactly what it is you are working towards. Be sure to include a range of short, medium, and long-term goals to ensure that your sights are not set too far, and you don’t lose your saving momentum.
Set SMART money goals
Make sure that your financial goals are Specific, Measurable, Attainable, Realistic and Timely. Goals that are unrealistic or too far in the future may be a set-up for failure. Develop a system that allows you to track your savings against your goals so that you can see the growth in your savings.
Determine what you want now versus what you want most
Goalsetting is not always about distinguishing between ‘wants’ and ‘needs. It is often a case of distinguishing between what you want now versus what you want most. To demonstrate this, let’s use the analogy of someone wanting to lose 5kg by following a healthy eating plan. When faced with the opportunity to eat a slice of cake, that person will need to distinguish between what they want now, i.e. the cake, versus what they want most, which is to lose 5kg. Both are nice-to-haves, but the drive to lose 5kg is greater than the desire to eat a slice of cake. As with many things in life, savings is about making choices.
Understand your money personality
If you intend to change bad money habits, spend time analysing your money personality and what makes you spend. To what extent did your upbringing influence your relationship with money? Are you fearful of scarcity? Do you spend impulsively to lift your spirits? Are your online spending habits different to when you are buying with physical cash? Does the money in your wallet hold value or has it already been spent in your mind? Do you suffer from FOMO when it comes to sales or bargains? Are you an excessive hoarder? Do you feel you have a healthy balance between enjoying a comfortable lifestyle while also saving for the future?
Work towards a profit margin
If you were a company, how healthy would your balance sheet be? Would you be generating a profit each month? What would your profit margin be? Would your balance sheet attest to a healthy business? It helps to think of your personal finances the same way as you would a company. Aim to generate a healthy profit margin every month and, more importantly, ensure that you invest your profits to grow your wealth.
Don’t increase your spending when your salary increases
It’s not how much you earn that matters, it’s how much you save. As your salary increases over time, don’t let your spending increase accordingly. Be intentional about keeping your living expenses constant so that as and when your salary increases, so too does your profit margin and your ability to invest. Don’t allow ‘lifestyle creep’ to eat away at your investable income.
Automate your savings
Automating your savings means paying yourself first. By automating your savings, you can ensure that you are able to live on what’s left. Enhanced technology and the availability of savings apps means that it is now easier to save than ever before. Figure out a system that works best for you and make sure your savings are prioritised.
Deliberately reject consumerism and make a conscious effort not to be caught in the trap of needing, wanting, and buying more. Marketing forces are strong and online shopping makes it difficult to ignore the hype, so take all steps necessary to remove yourself from the ‘noise’. Unsubscribe to online shopping newsletters, beware of sites like ‘One day only’ and ‘Deal Zone’ that make it hard to resist once-off special offers on goods you don’t need and be aware of marketing tactics that are designed to get you to spend.
Question all your purchases
The speed and efficiency at which we can now purchase goods mean that many of us miss out on the opportunity to do market and product research, shop around, and seek alternative options. Further, online marketers are experts at making us believe we are getting an exclusive offer, once-off bargain or discount for a limited period of time only, which often results in us rushing our purchasing decisions. Make a concerted effort to slow down your purchasing decisions, do your research, and read product reviews. If necessary, give yourself a ‘cooling off’ period between the decision to buy a product and the actual purchase. Actively practice the art of delayed gratification.
Change the way you talk about money
It’s easy to let negative thoughts and conversations about money slip into everyday life. But words have power, so make a concerted effort to adjust the way you talk about money. Move your mindset from one of scarcity to one of abundance. Replace ‘I’m not good with money’ with ‘I want to take charge of my financial future’; or change ‘I don’t have enough money’ to ‘How can I generate more money?’. Move away from assuming that someone else will manage your finances and become purposeful about taking control of your financial future.
Create an annual calendar
A budget hates surprises and one of the best ways to avoid unnecessary surprises is to overlay your monthly budget with an annual calendar on which you can highlight once-off, ad hoc expenses such as back-to-school expenditure, varsity deposits, festive season spending, birthdays, long weekends away and so on. Having a wide-angle view of the year is an excellent way of ensuring that expenses don’t creep up on you unexpectedly.
Continually visit your budget
Having said that, make sure to re-visit your monthly budget regularly. Things tend to change quicker than we realise and very often these changes affect your budget. For instance, you may have subscribed to an app during lockdown last year which you are no longer using, or you may now have uncapped Wifi at home which means you take out a cheaper contract on your smartphone as you have less need for data. If you find that your work-from-home status is likely to be permanent, you may want to re-assess your vehicle and your short-term insurance.
Re-direct your money wisely after settling debt
As and when you finish paying off debt, be sure to re-direct your future payments wisely. You can either channel the money towards paying off another debt or use it to increase your investment premiums. Avoid using the additional money to incur more lifestyle expenses.
Be sure to reward yourself for achieving milestones along the way, as this will keep you motivated and encouraged. Ideally, reward yourself with experiences that will create life-long memories for you to enjoy rather than purchasing material goods.
Keep yourself educated
Keep yourself up-to-date on personal financial planning, saving and investing so that it becomes a natural part of your everyday life. Almost every decision you take has financial implications, and the more financial knowledge you have the greater your chances of making good financial decisions. Ideally, find an independent advisor who keeps their clients updated on all things finance related.
Financial success starts with good saving habits. Our Financial Experts have been unpacking and providing practical advice on the best ways to preserve YOUR financial freedom. Contact our Financial Advisors to ensure that you are receiving Shariah-Compliant Finance advice.
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Source: (Moneyweb, 2022)