The first step to improving your savings habit is to honestly
assess your financial health. After all, you can’t solve a
problem if you don’t know what it is. Improving your savings
habit will help you reach your short- and long- term financial
goals. Before you can save, you need to develop a clear
picture of your expenses and your income.
This will help you work out if you are spending more than you
actually earn and help you to fix the situation by reducing
your expenses – remember it really is easier to cut down
expenses than it is to make more money.
No matter what you’re saving for – whether it’s for
retirement, a new home or a new car, or just to cultivate a
habit of savings - it’s important to start early. When it comes
to saving, the best time to start is now.
There are five (5) steps that will help you start saving:
• First, come up with a personal budget or monthly
spending plan. This will help you plan for expenses, reduce
excess spending, save for future goals, have money put aside
for emergencies and prioritize savings. Separate your income
and expenses but make sure that you update your budget
regularly as these figures may change from time to time. Your
income will include things like your salary, bonuses, retirement
income (if you have retired), income from rents and things like
that. Your expenses may be food and water, housing, clothes,
transportation, education, utilities (such as phone bills,
electricity, internet and such) and personal (such as hair and
personal care). Once you have estimated how much you will
earn and spend, subtract your expenses from your income. If
you have money left over, you can then decide how to spend,
save or invest this left over money. If your expenses are more
than your income, however, you must adjust your budget by
reducing your expenses.
• Second, set realistic savings goals. Know what it is
you are saving for and how much you need to save to achieve
that goal. Make sure that the amount you are saving is
meaningful but doable.
• Three, pay attention to your lifestyle; manage lifestyle
inflation. Most of us will spend more money if we have more
money to spend. As we move up in our careers, we tend to
spend more. This is known as lifestyle inflation. Lifestyle
inflation works against our ability to save and invest. You
must remember that every extra naira spent now, is less
money in the bank. People tend to spend more because they
want to be and appear like other people – neighbours, friends,
even family. But you must remember that these people may
owe a lot of money for them to live the kind of life that they
live. You need to decide whether you want to join these
people in a life of debt or save to secure our families’ futures
and our retirement.
• Fourthly, understand the difference between needs and
wants. “Needs” are things that you must have in order to
survive, such as food, shelter, clothing, healthcare,
transportation and such. On the other hand, “wants” are
things you would like to have, but that you do not necessarily
need for survival. Sometimes it is difficult, especially these
days, to tell the difference between the two but you must
honestly do this if you want to manage your spending and
save.
Lastly, explore savings accounts. The easiest way to save is
to put the money in a savings account. Try as much as
possible not to touch the money you save. To make sure that
you do not touch this money you can put it in a high yield
savings or investment account that has higher interest rates.
Since your money must stay in the account for a period of
time, this will help you to resist any temptation to touch it.
These tips are really simple and if you stick to them, you
should see an improvement in your savings. This has been
courtesy Stanbic IBTC Bank as part of The Bankers
Committee Financial Literacy Public Enlightenment Programme
brought to you by The Bankers Committee, comprising all the
commercial Banks in Nigeria and the Central Bank of Nigeria,
CBN.
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