“ The price of anything is the amount of life you exchange for it.”
Henry David Thoreau
If you are reading this then most likely you are like me, in my determination to save an extra coin. It does not happen magically, I wish it did, but it doesn’t. It requires deliberate planning, discipline, and mostly sacrifice, but it is well worth it.
Some of the habits that I have developed that I have found useful in this journey include:
1. Work with a set budget.
This I fondly call living within your means. Create a budget that suits you, and don’t go cutting out everything that you consider fun. You will hate it and it will not help you. Set a budget that is a plan. That helps you to save, pay your bills and most importantly enjoy life now, today. Use a budget as a guide. Don’t also be like me previously, when I used to think, that just because I have money in the bank, then I can afford what I want. There is such a thing as having too much house, car, and general lifestyle, for your income bracket. So it’s important to sit down and determine what works for you and what does not and move forward.
2. Create a set of life goals that include your financial aspirations:
Nothing focuses you more than goals you have set for yourself and are determined to achieve. Goals give you a purpose and help you channel your energies to a preset purpose. When you are focused it is difficult to misuse resources such as time and money. You find yourself channeling your limited resources towards what will help you achieve the most towards your goal.
3. Have an emergency fund;
An emergency fund is your rainy day stash. The emergency fund comes in handy to sort you out when life happens because let’s face it, emergencies don’t give notice. The emergency fund helps to pay for financial needs that crop up suddenly, like a plumbing situation at home, a burst car tire that needs replacement, etc. You can use the emergency fund to make payments without having to dip into your monthly budget or worse still going into debt to cover it. Normally an emergency fund should be at least 6-9 months’ worth of living expenses. Keep your emergency fund close, but not too accessible, so you are always dipping into it.
4. Have different sinking funds for your planned big expenditure items
Most of the time when we plan, we can comfortably meet and pay for our big expenditure items. One of the ways I have learnt to do this is through sinking funds. A sinking fund loosely defined translates to a project-specific savings account. It can be short-term for such payments as school fees, annual holidays, and purchase of household items. It can be medium or longer-term such as the purchase of a car, or deposits for the purchase of a house or land.
Once you establish how many sinking funds you need, then from your budget you can put aside some amount monthly towards your project. Though you don’t have to have a different savings account for each sinking fund, you need to keep track of how much in a savings account goes to which sinking fund. This is so there is no confusion when it comes to spending the amounts saved.
5. Automate your expenditure
I am a big fan of automating expenses. Once I realized how my willpower alone was not enough to motivate me or keep me disciplined with my finances, I chose to take from myself the power to decide when and how to spend most of my income. The biggest casualty used to be savings and investment. I used to save what was left in my account, which most of the time was nothing.
Automating what should go into savings, investments and debt repayment, and other bills will leave you with minimal “purchasing power” which means that you will have no choice but to use a budget to be efficient with your money.
6. Take advantage of sales & offers.
Do buy during sales and offers but only if it is items you were going to purchase anyway. I have been known to bring forward a purchase, especially if it is a big-ticket item that will save me quite a good penny, I will usually squeeze myself if need be. Most of the time I plan around holiday sales or the craze that is black Friday and cyber-Monday. Though most merchants are truthful, it is always important to confirm that indeed you are getting a deal. On perishable stuff, make sure you can work with the expiry dates, especially if you are taking advantage of the offers to stock up.
7. Celebrate both small and big accomplishments in savings
The discipline of saving is a difficult one to cultivate. That is why I am big on patting yourself on the back whenever you hit your saving milestones, big or small. What this does is it motivates you to accomplish bigger and better goals. So as you make financial plans and budgets, put some pitstops, that help you to celebrate the progress you are making. Don’t make the celebration to outlandish as it will defeat the purpose of saving but nothing stops you from enjoying your favorite treat when you finally reach that goal of having a fully-funded emergency fund.
8. Buy in bulk
As much as humanly possible, buying bulk. Whether it be vegetables at the market, meat from the butcher or abattoir, or the non-perishables from the wholesaler. Try to prioritize bulk purchases because the savings over time do add up. Find out where around your area where you can make purchases in bulk. You also don’t want to go out of your way in trying to save money buying stuff, but you end up spending more on transport or other costs.
9. Pay off your debt early
This is a good habit not only because it will save you paying more in interest, but the peace of mind you will enjoy, is immeasurable. One of the habits I have, when I have to use a credit card, is to make sure I make the full payment monthly. What this does is help me live within my monthly budget, if it is not in the budget and I cannot afford it then I just can’t use the card. It has also helped me avoid paying interest charges that accrue when you defer payment after the grace period which in my case is 50 days. I have given an example of credit card debt but this is true of most loans, such as bank loans and SACCO loans.
10. Avoid peer pressure
Most of us may think that we left peer pressure when we got through our teenage years, but the adult kind of peer pressure is clothed in “keeping up with the jones’s”. Peer pressure is real in all life stages it’s important to realize early what triggers you and work towards avoiding them and or minimizing contact. Peer pressure has been known to push people to the edge where they borrow to keep their appearance. It is important to appreciate your current “lane” in life even as you work towards your next status. It will save you a lot of financial headaches.
11. Use your time wisely
The easiest way to find yourself in the rabbit hole that feeds your temptations is to have a lot of unplanned free time. Too much idle time leads to picking up undesirable habits. To avoid temptation, find good use of most of your free time allowing yourself some time to rest. You could, for instance, learn a new skill, teach someone a skill, or find a hobby to fill your time. Find constructive things that occupy your time, not only will you avoid bad money habits you will likely find joy and self-fulfillment.
12. Only buy items that are in your list
I have this habit of going to the supermarket to get 3 items and getting out with 12! In my defense, I can be such a scatterbrain sometimes….Anyhow, I find that I do better with lists, I write on my phone the items I need to buy before I make a trip to the market whether it be the supermarket or the grocery market. It has helped me somewhat to reduce my transgressions. It is still work in progress but i am happy with the reduced impulse buying so far.
Any habit worth having requires discipline, it does not matter what you want to achieve self-discipline is the overarching principle. Discipline carries you well through this wealth creation journey, but remember to include the discipline of stopping to smell the roses, that’s why they exist, for you to take in their scent!