Savings

How to Commit to Saving Money

This analogy begs the question, “how do you commit to savings?” You involuntarily commit to breathing, even as a newborn. You can choose to stop breathing, at least until you pass out. Then, you start breathing again. What about savings? How do you make savings as involuntary as breathing? The following seven steps will take you through the process of first making your savings meaningful, then making your savings reliable, and finally making your savings as involuntary as possible.

Steps to Making Savings as Easy as Breathing

Depending upon the survey or study you read, anywhere between 60% and 80% of Ghanaians are living paycheck-to-paycheck, meaning they have nothing left over at the end of the month to save or invest. For many of these households, savings seems like a fantasy, like running a marathon might seem to most adults. The reality is that it will take an initial commitment and ongoing commitment (action) to make savings a reality and a success. Making the transition from paycheck-to-paycheck to a regular habit of saving can become as natural as breathing. Follow these steps, and you will find yourself saving with no more thought than you give to the expansions and contractions of your own lungs.

Identify Savings Goals

To begin your commitment to savings, you must make the process as meaningful as breathing. You know that if you don’t breathe, you start to hurt and even black out. You will also likely end up with a major headache when you wake up.

What to Save Your Money For:

Everyone knows that having an emergency savings account can prevent major financial headaches, or at least remove much of their pain and sting. Setting additional savings goals for short-term wants will also remove much of the pain from your personal finances. From vacations and gift-giving to appliance repairs and your next car, there is seemingly no end to the things you should be saving for.

Strategies to save money

Set a financial goal

Have a target or a goal and save towards it. It could be a short or long term goal. Do you want to save towards emergencies, payment of rent, purchase of a car, or to start a business? Having a target(s) helps to keep you focused and helps monitor your progress.

Create a Savings Plan

After identifying your goals, develop a savings plan to assist you achieve them. Various theories have been propounded to guide people on developing a savings culture. 

We have the 50 30 20 rule which says, out of your salary or income, 50% is spent on basic needs such as food, rent, transportation, utility etc,30% on investment and savings and the remaining 20% on wants such as vacations, purchase of luxurious items etc.

Others subscribe to the 70 20 10 rule. Here, 70% of your income goes into monthly bills and everyday expenses, 20% for savings and investment and 10% to charity, tithe or payment of debt if any.

There is the 80 20 rule too. 20% of your salary goes into savings and investment while 80% is for your general expenses.

These rules are just to serve as a guide. Feel free to develop a plan that works for you.

Create and Stick to a Budget

Budgeting helps create a spending plan for your money. Without a budget, you might end up spending without keeping track.

Set realistic and achievable targets and stick to them. Know your income and make plans to spend less than what you make. Budgeting also helps you to live within your means.