Saving money is a really daunting task to any individual. It actually sounds ominous to advise a newly employed person to save more money. I mean, we have responsibilities! Rent, utility bills,parents, siblings, religious acts just to name a few and you want to promote saving? So what’s the best approach we normally use? Settle all obligations and then save some of what is left. This sounds reasonable but in the end its a zero sum venture. Why? Because there are no limits imposed.
What Do I Suggest Then?
It is best to itemise all the activities you intend to undertake in the coming month and their associated costs.This is what we call budgeting. Normally, writing things takes a lot of load off your mind and prevents you from taking wild guesses at stuff you can easily conclude on with little information. And with your expenses in written form, its easier for you to refer to them and update them if the need arises.
That’s the first step. Budgeting. Now that you have them written down, its left with how to track the expenses. That can also be done by noting every daily expenditure and comparing with the intended. If this proves tiresome, there are a whole lot of mobile apps that can help in noting expenses incurred during the day. A good example would be “Money Manager”.
You have budgeted, you are tracking. That’s fine. Now we know approximately how much we are to spend each month. Lets add a margin of 10%, for incidentals (unforeseen circumstances), you know.
Saving Ourselves from Our Spendthrift Selves
The easiest way out of this conundrum is to have multiple savings accounts depending on your future intentions (either with the bank you bank with or other trustworthy banks). You need an ATM card (or mobile app ) and then set up a standing order on your salary account. That’s the one you should have an ATM card for anyway. A standing order automatically deducts money from one account and deposits in a desired account on a specific day of the month. For the purposes of saving, this date should not be more than five days from the usual payday, respectfully, for our own good.
When these reach a desired level, one can purchase 90-day,180-day treasury bills with “rollover with interest” option to help you grow your portfolio. We are not looking at taking huge financial risks yet. Just something small for us boys and girls.
Remember that saving a 100 cedis each month and investing in a 90-day treasury bill (with the option to rollover with interest) for 10 years at the current rate of 14% leaves you with about 26,000 cedis. Just 100 units of any currency. Don’t despise small beginnings and also remember that little drops of water makes a mighty ocean. If you are to maintain that for 20 years, that’s just 129,000 cedis. Beautiful, right? Thus the power of compounding.
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