People across the earning spectrum convey a similar concern; whilst they are cautiously optimistic about being able to cover their living expenses on a monthly basis, they are simply unable to save anything.
The sentiment is that there is simply not enough money with which one can cover monthly expenses as well as siphoning off a portion for savings.
This is not only a frustrating phenomenon, but also carries with it substantial concerns. Having no funds available outside of what one spends on monthly living expenses leaves one vulnerable for unexpected expenses, such as a broken washing machine, a failed MOT or even something like costs associated with annual events, such as Pesach. This is aside from the need to put money away for later in life, such as marrying off children or retirement.
The question is, as common as this phenomenon may be, is there something that can be done?
The most common mistake is to hold off on saving until all other expenses have been met. Inevitably, though, there is often no disposable income remaining by the time all of one’s monthly living expenses have been met.
Similarly, people often feel that it is simply not a good time to start saving. The reality is that there is never a good time to start saving. Even if income increases, without habitually saving, spending inevitably increases accordingly.
The major shift that a person can make in order to discover significant improvements in this area is to give savings much higher priority in one’s list of expenses. If one was to view payments to savings in the same light as, say, an electricity bill or a weekly shop, then one will automatically find it much simpler to put something away each month.
Here are some tips to help begin saving:
1. Start small
The secret to saving is to form a habit. The easiest way to do this is by starting with easy ways to save. Begin by putting away small amounts, such as all small change, or by siphoning off a fixed amount of one’s monthly pay cheque. It is important when starting small not to feel disheartened by the slow progress or the seeming paltry amounts. The key here is not the amount, but rather, the habit-forming behaviour. Once you are used to the idea of regularly putting money aside, it becomes entrenched and makes it much easier to progress to saving amounts that are more meaningful.
2. Save now!
As we have already discovered, there is never a ‘good’ time to save. Rather, if one feels strongly about saving the key is to simply elevate this on one’s list of spending priorities. It is, however, worth pointing out that for those with significant debt, and, more crucially, high interest fees, putting money aside for future instead of paying off debt may not be the right decision. Credit card fees can be as high as 30% in some instances, whereas interest earned on savings will be just a fraction of that.
3. Save windfalls
There are times (though admittedly, not often!), where we receive an unexpected windfall. This can be in the form of gifts, dividends, one-off tax credits payments, yerusha or anything else. It would be wise to put at least a considerable portion of such windfalls away.
4. Make savings automatic
To make saving become habitual, it is a good idea to establish an automatic process that does not require manual input. There are several ways to do this. Firstly, one can open a savings account and set up a monthly standing order to transfer money from a current account to a savings account. With the advent of technological advances, there are other ways of doing this. For example, there are mobile telephone ‘apps’ that offer savings plans such as ISAs, which are linked to one’s current account, and round up every purchase to the nearest pound, siphoning off the difference into the ISA.
5. Pay yourself first
To become a true master saver it may well be necessary to learn to pay yourself first. Instead of falling into the aforementioned trap of thinking savings can be made after all other expenditure, get used to the idea of making payments into savings accounts as the very first payment after being paid at the end of the month.
6. Team effort
As with all other aspects of financial stability, saving should be a team effort. Both husband and wife should be ‘on board.’ If one makes it a priority but the other does not share the sentiment, it will probably be difficult to implement.
As with any meaningful achievement in life, this will take time, both in terms of forming a habit and in accruing a respectable amount. But perseverance and discipline is the key to a meaningful breakthrough!