We all know that it is important to save money for a rainy day from a young age.
Unfortunately, when we start earning our own money, the first thing that we do is to spend it on things that we never had growing up, jumpstarting lifestyle inflation.
Many young employees start buying gadgets that are out of their budget because of peer pressure and societal norms, thinking they still have many years to go in their careers.
However, the years go by, and they are already working for ten years but still have no savings under their name.
So, where did it all go wrong?
Don’t wait until you’re rich before you start saving.
Like what I already wrote before, it is crucial to understand that you don’t have to wait until you are earning a high salary before you start saving because chances are, you would have already built the habit of spending every last peso of your paycheck, and may even have a list of debts.
Habits are built because they are what we continuously practice. Then we rationalize that we can always save quickly once the next promotion arrives or the next salary increase happens.
Sure, they will happen. However, chances are, you will most likely still be unable to save because you never built the habit while still earning a lower salary.
On the other hand, many employees, OFWs, and freelancers already earn a relatively high income at a young age. Still, they just couldn’t get themselves to save money.
This only means that difficulties with saving money encompass different areas of life, from low income to high income.
He who is faithful in what is least is faithful also in much; and he who is unjust in what is least is unjust also in much.Luke 16:10 NKJV
This post is inspired by a commenter on Facebook who said that though she was earning a high salary, she just can’t save. Though I already gave a short answer, this is the full version.
How do you start saving?
The first thing you need to do when starting your saving habit is to build the confidence that you can save money.
So, how do you do that?
You will need to allocate a small saving amount that you will follow conscientiously every week for eight straight weeks. You can’t save in lump sum because that will defeat the purpose of habit building.
At this point, we are not too concerned about the amount you save but about the consistency of saving.
Then gradually increase it to a less comfortable amount for another eight weeks. You can double your initial amount or 1.5x, whichever you prefer.
During this stretch, you already have two months of saving experience, no matter how small so it will be a little bit easier.
Increase it again gradually until you save at least 10% of your monthly income. Instead of saving every week, you can now transition to a monthly or bi-monthly saving scheme, depending on your payday.
At this point, you have already been saving for four months, and you should already have gained some confidence. The next thing you need to do is to maintain consistency.
You can put your progress in a small notebook or a spreadsheet for easier monitoring.
Congratulations, you are now a saver!
Putting it to practice.
For example, you chose P100 as your weekly saving amount for the first eight weeks. Just think of this P100 as a coffee you didn’t buy for one day.
You may notice that after two months (8 weeks), you only saved P800, but don’t worry. It’s perfectly fine. You should not force yourself when you are still building confidence.
In the following eight weeks, you can double the P100 to P200 per week. That will amount to P1.600 for the second eight weeks and P2,400 in total for the habit-building challenge.
If you succeeded in the first four months, you should have gained the momentum and confidence that you can really save.
Afterward, you can gradually increase your savings rate until you are saving at least 10% of your monthly salary. Then do it for the rest of the year.
In the following year, you can once again increase your rate until you reach a 20% saving rate. Then save until you have six months worth of your expenses stored in your bank as your emergency fund.
Important: If you fail at any point, you can always reset the challenge. You can also find someone to do the challenge with you for added accountability.
What to do with your savings?
Remember that when you save, you should have a goal for it and not just save blindly.
Aside from the emergency fund, you can also use this habit for a big purchase, a vacation, a special occasion, tuition, or anything.
What to do if there is really nothing to save?
Though this guide gives a step-by-step method of starting the habit of saving, unfortunately, not everyone can stash some extra cash, especially if they are breadwinners or low-income earners.
If this is the case and you can no longer wring your budget to find some expense gaps, then it is time to find other income streams, like freelancing, selling, and other side hustles that will you increase your income, so you will have money to save.
Saving money is not just about the amount but the attitude towards money that is important.
It may sometimes feel that you can always catch up with savings once you earn higher. Unfortunately, that day sometimes never comes.
So many Filipinos earning relatively high incomes were slapped with the reality that they never prepared an emergency fund for potential income loss, which happened during the start of the pandemic.
Remember that you can save. You just need to develop the habit and discipline that it requires. Do it for yourself and your family.
Happy saving, and God bless!
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