Hello everyone! Hope you are having a good Saturday. I am writing this post in a rush, because I couldn’t spend much time on this as I would’ve liked to – work has been piling on, however, I am trying to stick to the habit of posting every Saturday? Hope you all are doing well and continuing to remain as sane as one could during these times.
Also this post, as many of these finance ones, comes with a few disclaimers. I’ve been told that they are unnecessary and yes I agree. However, having said that and given that I know that there are just a few people that actually read my posts, I want to be as accommodating as possible. Unfortunately, finance isn’t really one of those topics. And for that, I apologise. This post in particular, is for those who are able to consider saving and who are not burdened with fixed expenses including rent, education fees, childcare, taking care of elderly parents etc. If you are only getting by with no unnecessary spending, this post isn’t for you and I hope your circumstances improve sooner, than later.
And second, I am not a finance expert or advisor.
As I started writing this post, I began listing out all the ‘tips’ I could think of how it would be helpful to save better. If some of them sound repetitive, my sincere apologies but I’m not going to lie, a lot of the finance advise videos I watch and articles I read, are also pretty repetitive. And this is ONLY because, there is no magic formula around it and no shortcuts. Sometimes, hearing these repeated messages or tips only make it all the more valid as they are tried, tested and proved to be successful! #Psychology101
So here are a few ‘tips’ on how to save better from me. I’m not sure if they would work for everyone and since of the recent past I might have become more aggressive in my savings even. I don’t even know what I’m saving towards anymore but with everything that’s going on, it feels like there is some purpose in savings. If that makes any sense at all.
Consider savings as an expense and have a separate account for savings
I speak of this in detail in my first blog post on savings and really, I think this is the single most important step to launch yourself into the habit of saving. Just like your phone bill, and your rent, you have to consider savings as an expense. There is no other way around it. Unless you have automated it or a standing order for your savings, make sure this is one of the FIRST things you move OUT of your account after you have taken care of any primary/fundamental expenses for the month.
On the same note, it is imperative, and I cannot stress this enough, that you have a SEPARATE bank account for savings that you can transfer the savings to. I would also encourage that the savings account is in a separate bank (even though this would incur a LKR 30 transaction fee). This would mean that there would be no accidental linking of the two accounts to one card because the bank would think it’s easier for you (been there and have spent all those savings) and moreover, you can control a lot of things in your savings account and not request for internet banking, ATM cards etc. Think of giving yourself two different personalities when dealing with the two banks even. 😂
Have ONE savings accounts to start with
Now this was real confusing for me at the start of this savings ‘journey’. After watching and reading one too many personal finance videos and articles that spoke of emergency funds and retirement, I didn’t know where to start. What’s more, as I have mentioned earlier I have been taking on contractual roles since 2013 and this means I am not entitled to EPF of ETF. This got me even more worried.
But don’t get me wrong. I still think emergency funds and retirement accounts are very important and might even write in detail about the types of savings accounts I have some time later. However, we are starting to save.
The key thing, when starting to save is not to overwhelm yourself with too much information and not to also get too bogged down by realising you have a lot to catch up with, which in turn leaves you feeling inadequate and then you question your life’s existence altogether. That took a turn, but we all know what I’m talking about.
So, my suggestion would be to start with just ONE savings account where a pre-decided amount would go into your account every month. Remember, the savings has to leave your account FIRST with the other expenses you make. Not at the end of the month with what’s leftover. It might also be a good idea to pray to the Gods and hope nothing drastic happens to you for a while. Here in Sri Lanka, most parents will still lookout for you, but we are trying to be financially independent adults here and it would be best not to ruin this image.
Not savings related – but medical insurances (if you don’t have one from your company) are also great to have if you don’t one already. While not a lot is covered as part of OPD (unless you pay a very high premium), it can be useful to have this because well, life. Most insurances also have monthly plans that are flexible as far as I know but you could probably check on this.
Consistency is key
This is probably a no-brainer but I talk about this in my first blog post on savings as well, but it is so very important to remain consistent with your savings. And by consistent, I mean monthly (we are going with the general assumption that people get paid every month – I’ll do up a separate post for finance and freelancing a bit later).
Hoping that you have a budget already, decide on an amount you are comfortable with putting aside. This should be money you would not need under any circumstances. It’s a good idea to also be reasonable with yourself. Of course, it would be good to keep some money to spend to eat out (or get food delivered), to maybe shop a little but still there should be a FIXED amount going into your savings every month.
The idea is to not feel like we are depriving ourselves of something when saving. I think a lot of the time, people get real ambitious with savings at the very beginning, and then put away anything that might also be discretionary spending and end up withdrawing from their savings account. I am not in the least ambitious about anything in life so this has worked out well for me, but if you are ambitious, kindly tone it down if you are trying to save.
And unless you are subject to multiple pay raises a year, I would recommend to keep this amount fixed for at least a few months. Since we are talking finance, I would say to keep it consistent for at least quarter. Being consistent is what builds a successful habit be it working out, consuming less alcohol or in this case, saving more.
Track your savings
I spoke earlier on the importance of tracking your spending. I’m going to add to this and tell you to maybe create another sheet in that spreadsheet or another tab in an app that you are using and track your savings as well. It would be helpful to Google a few formulas and put them in place so you are able to see the total of what’s in your savings account and this in turn might be helpful to crosscheck against if you have for example, SMS notifications coming in every time a deposit goes to the savings account.
Revisit your finances, if possible, weekly
I’m not going to lie, tracking my savings and looking at that sheet has become of my favourite past time activities. It’s like how parents look at their favourite child with pride. 😂 For me, it’s my favourite spreadsheet. I think my aggressive savings have become a result of looking at the total savings amounts at the bottom of the sheet for too long.
But favourite child aside, revisiting your finances also does something else.
First, it helps you try and understand how you are doing with your finance goals. I’ve spoken about them briefly in my last article as well. Moreover, by looking at your monthly spending and saving you are also able to gauge how much more you can actually put aside into savings and if there are other budget-line reallocation that needs to happen. This could even help you realise if you are able to work towards buying something off a wishlist you would have. Even these early retirees from the FIRE movement also admit to checking in on their finances every week despite their net worth of $870K+. For those curious that is around approximately LKR 173,000,000 and they are in their mid-thirties.
Save SOME of your extra money
Before we proceed, I would like to explain what I consider to be extra money to be. These could range from birthday money, Eid/Christmas/New Year money, random gifts from elders (?!), occasional freelance gigs, an old debt you lent someone that has finally come back to you, investment maturity, money you got from selling something you didn’t need anymore, inheritance (?!!!) and well, you get the picture.
Technically, this would be money, you didn’t account that would come in. Or you did, but it’s outside of your monthly salary. Now the first instinct most people would have (I did too until very recently) is to treat oneself. Because life is hard. We have now lived (are living) through a pandemic. Because you deserve it. Because this is what you do with unaccounted money. It’s difficult but I have now managed to stop telling myself these lies.
So instead, what do I do?
My first suggestion would be to of course save it all. If you are able to. But if you are like me and consider yourself special and a whore for self-love, keep a percentage in your checking account (your main transactional account) and put the rest in your savings account. I currently have a 50-50 ratio and it’s the 50% that I made that ASOS purchase with. However, this is mostly applicable for amount above say LKR 8,000 or more. I personally think anything below that should remain in your checking account and you shouldn’t give the bank the pleasure of stealing LKR 30 more from you.
I hope this post has been somewhat helpful and I’m sorry if it sounded repetitive but like I said, most financial ‘advice’ really is. Some are able to better articulate it than others. Moreover, for anyone starting out on saving, ‘advice’ would either way remain the same across the board.
If you have any feedback, comments on this post or suggestions for me to write something else on this comment, please do let me know and I will try my best to accommodate.
Thanks so much for reading it really does mean a lot. I hope this has been helpful to you in some way or form.