By Sylvia Juuko
Saving should be a straight-forward principle of managing your finances but many people struggle to cope with making it a habit.
A greater percentage of feedback from readers suggests that they are falling short of their savings targets and are continually seeking tips on mastering this important habit.
One reader noted that because he earns a very low income, it is impossible to save. On the other hand, some high income earners claim that there is no need to save because they have worked hard for the money, they view spending as a reward for their effort.
I wish I could say saving can only be done if you have some spare change but it is not. Cultivating a savings habit is something that must be done without fail. Your current savings position could be a pointer to your level of financial literacy, which is reflected by your confidence, knowledge, attitude towards money and the current financial status.
Most savers will tell you that the habit of delayed gratification is not easy to master at the start, but it can be done.
If you have failed to save or tried but faltered along the way, you have to consider the following:
Save, regardless of salary
You cannot use your current level of income as an excuse for not saving. If you earn sh100,000 or less, you must save a percentage of this income, ideally 10% for a start. The same rules apply to those who earn seven digit incomes and above.
However, a low income earner is at a higher risk if they lack any savings buffer because they are more vulnerable to shocks to their income.
You have to have strong reasons or targets for undertaking savings. For example, if you want to change from your current financial position where you have to borrow to sustain basic needs because you have spent your entire earnings at the beginning of the month, this can be a big motivator. You may choose to acquire an asset or build a home as one such savings goal.
This will motivate you to save and attain your goals. Clear goals like “I want to have acquired an X amount of assets by 30 or 45 years” is a good way to work towards your goal.
For any income earner, your financial position could be a matter of choice. With every shilling you earn, you can make choices regarding whether you want to progress or stagnate financially. If you choose to purchase an expensive phone as opposed to a piece of land, your spending reflects who you want to be.
Whenever you make purchases, particularly liabilities as opposed to assets, always remember that time is not on your side.
Another key issue to consider, especially those in formal employment is that it’s not the responsibility of your government, company or children to look after you at retirement.
Retirement plans should be supplemented by other investment efforts and not look at as your sole retirement plan.
Its only when you have a nest egg tucked away that you can start worrying about whether your interest rate or return on savings is above inflation. You cannot have such discussions when you have zero savings. Savings always gives you options therefore, its importance should not be underrated.
It is never too late to start
You can also consider the fact that it’s never too late to start saving. Initially, putting away sh1,000 per day or week appears little for any income earner, but once this amount accumulates over time, it can be used as a down payment for an asset.
Get into the habit of saving until you get the hang of it and then raise the savings amounts.
For many savers, a standing order with a financial institution has worked, especially if you lack the discipline. Do not forget that whenever you have an emergency, you can fall back on your savings instead of borrowing.
Once you have cultivated this habit, saving should not be an end but must be invested to allow your money to grow and work for you.
The writer works with Bank of Uganda