Working on your savings Culture.
By Olumoke Caxton-Martins
Aisha sat down in her grey Toyota Pencil light contemplating the actual meaning of the saying “when it rains, it pours”. She was forced into contemplation by the torrential downpour making its way from the skies. It seemed the gods were weeping. It also seemed that they were angry at her and had decided to punish her.
The day had started on a less than perfect footing. Making a six digit salary made her a comfortable young lady, with a promising future. However, there was nothing her six digit salary could do when her generator refused to come on when she woke up at 4:30am. When making a mental note to call the technician to fix it, she recalled that he had advised an engine change some weeks ago and she had postponed it as she could not spare the cash at that moment. Her morning routine was done with a flashlight. If there is no power in the next few days, the flashlight would have to be her saving grace.
The day had started on a less than perfect footing. Making a six digit salary made her a comfortable young lady, with a promising future. However, there was nothing her six digit salary could do when her generator refused to come on when she woke up at 4:30am. When making a mental note to call the technician to fix it, she recalled that he had advised an engine change some weeks ago and she had postponed it as she could not spare the cash at that moment. Her morning routine was done with a flashlight. If there is no power in the next few days, the flashlight would have to be her saving grace.
Things went further downhill when she was making breakfast and lunch to take to work. Her cooking gas decided to run out. Unknown to her, the gas in the back up camping gas was out too. With the hike in gas prices, she had an economic disaster looming. She simply left the half-cooked food on the gas for future processing and chalked that on her to do list as well.
A query at work, a few missing important documents, an exorbitantly priced lunch that was not really great tasting and some flared tempers down the line, she was ready to quit the day, go to bed and start another day. Unfortunately, “they” were not yet done dealing with her. Her car had to overheat and break down on the Carter Bridge…near its Apongbon end, at about 8pm, on her way from work. It was neither the place nor the time for a single lady to have car trouble.
The heavens waited for her to get down and look into the bonnet though before emptying themselves upon her. Coincidentally, there was an idling tow truck somewhere nearby but the driver wanted N100,000.00 to tow her car wherever for her. The hoodlums were gathering round too. They expected to be settled because her car had dared to break down around their abode. Unfortunately, she had just N1,000.00 in her bag, being just a few days to her next pay day. Her contemplation led her to look through her phone for names of people she could call for a cash bail out and a quick, free tow…
A query at work, a few missing important documents, an exorbitantly priced lunch that was not really great tasting and some flared tempers down the line, she was ready to quit the day, go to bed and start another day. Unfortunately, “they” were not yet done dealing with her. Her car had to overheat and break down on the Carter Bridge…near its Apongbon end, at about 8pm, on her way from work. It was neither the place nor the time for a single lady to have car trouble.
The heavens waited for her to get down and look into the bonnet though before emptying themselves upon her. Coincidentally, there was an idling tow truck somewhere nearby but the driver wanted N100,000.00 to tow her car wherever for her. The hoodlums were gathering round too. They expected to be settled because her car had dared to break down around their abode. Unfortunately, she had just N1,000.00 in her bag, being just a few days to her next pay day. Her contemplation led her to look through her phone for names of people she could call for a cash bail out and a quick, free tow…
In these times, for successful living, you need to have money. You don’t necessarily need to have a lot of money, but you do need to have a lot of control over your cash flow. Being able to discipline ourselves in financial matters would guarantee a bit more order in our lives. Money is the requisite ammunition we all need against lack, hunger, homelessness, disease, nakedness, ignorance and unforeseen circumstances. Aisha could do with a good dose of money right now.
To live a rich and satisfactory life, you need to make more money than you spend. Aisha had a tidy sum coming in monthly. However, from her reaction on “the rainy day”, money was merely passing through her hands; she had been a conduit for funds and not its custodian. In finance, being rich is having enough to meet your needs. Being wealthy however, means having more than you need to meet your needs without having to work. To get to the stage of being wealthy, you have to get into the habit of retaining a portion of what you earn. This is what is called saving. Making a lot of money would not make anyone wealthy. Saving a lot of money would.
To save ourselves from the fate staring Aisha in the face, it is essential that we develop a culture of saving a portion of any money we get (either earned as income or received as a gift). The money we save today would in turn come and save us tomorrow. From the entrepreneur in need of start-up capital to the ‘financial diva’ in need of funds for the creation of an investment portfolio, I would say that a lifelong habit of saving ensures that there would always be capital to start business and/or money to invest.
Saving is an art that can be learned. It is a skill that can be mastered. No one was born frugal. We all need to learn this skill and develop this culture. In the first part of this series, we would be dealing with “Why Save?”
• We save to secure our future.
Saving to ensure our tomorrow is better than our today should be a part of everyone’s lifestyle. Saving at least 10% of all inflows (I am careful not to say income because I know some people would take that as liberty not to save from their gifts and bequests), helps us prepare for a future where our passive income would become greater than our living expenses i.e. financial freedom. Passive income is income made without active engagement e.g. income from real estate, bonds, stocks etc. Generating passive income requires you to invest your capital i.e. your savings. Saving ensures you always have capital to invest. Saving for the future, both ours and those of our children, is something we should not stop doing for as long as we live.
Saving to ensure our tomorrow is better than our today should be a part of everyone’s lifestyle. Saving at least 10% of all inflows (I am careful not to say income because I know some people would take that as liberty not to save from their gifts and bequests), helps us prepare for a future where our passive income would become greater than our living expenses i.e. financial freedom. Passive income is income made without active engagement e.g. income from real estate, bonds, stocks etc. Generating passive income requires you to invest your capital i.e. your savings. Saving ensures you always have capital to invest. Saving for the future, both ours and those of our children, is something we should not stop doing for as long as we live.
• Saving for a project
There always comes a time in our lives when we want to achieve a goal that we require a pool of funds to pull off; more money than we usually make at once. Examples are weddings, purchase of assets, vacations etc. Compared to saving for the future, saving for such projects requires a higher level of discipline. If I earn N100,000.00 every month and in preparing for the future, I save N10,000.00 every month, to buy a car in 3years, I need to plan my finances towards it. Saving for a project is tied in with goal setting; you set a goal for the project, determine how much money you need for the project, when you want to do the project and then determine how much you need to set apart on a periodic basis to be able to have enough for this project by that time. I am of the opinion that this should not interfere with your saving for the future. Since there would be life after the project, preparing for a comfortable future should not be suspended for it.
There always comes a time in our lives when we want to achieve a goal that we require a pool of funds to pull off; more money than we usually make at once. Examples are weddings, purchase of assets, vacations etc. Compared to saving for the future, saving for such projects requires a higher level of discipline. If I earn N100,000.00 every month and in preparing for the future, I save N10,000.00 every month, to buy a car in 3years, I need to plan my finances towards it. Saving for a project is tied in with goal setting; you set a goal for the project, determine how much money you need for the project, when you want to do the project and then determine how much you need to set apart on a periodic basis to be able to have enough for this project by that time. I am of the opinion that this should not interfere with your saving for the future. Since there would be life after the project, preparing for a comfortable future should not be suspended for it.
• Emergency funds
This is what should have saved Aisha. In a life where there is financial order and some form of budgeting, money should be set aside for eventualities. Things happen. The generator might not start, one could run out of cooking gas, or the car might break down. If there isn’t any money set apart for such emergencies, one can be stranded and have to go a-borrowing. There is wisdom in setting something apart for unforeseen circumstances. I like to call this saving for the ‘rainy day’. Your definition of a ‘rainy day’ could be a series of small scale mishaps like Aisha’s, or major life events like job loss or disability. The amount set aside for these would depend on the size of your expense portfolio.
Start work on your savings culture today. Don’t be stranded.
This is what should have saved Aisha. In a life where there is financial order and some form of budgeting, money should be set aside for eventualities. Things happen. The generator might not start, one could run out of cooking gas, or the car might break down. If there isn’t any money set apart for such emergencies, one can be stranded and have to go a-borrowing. There is wisdom in setting something apart for unforeseen circumstances. I like to call this saving for the ‘rainy day’. Your definition of a ‘rainy day’ could be a series of small scale mishaps like Aisha’s, or major life events like job loss or disability. The amount set aside for these would depend on the size of your expense portfolio.
Start work on your savings culture today. Don’t be stranded.
www.fandksavings.com.ng