I live in a country where 50% of the population earning an income does not save money at all. I guess the biggest problem is not the will to save but rather the way 'people were taught to save'.
Remember my previous post where I shared the benefits of making small steps with consistency?
The same principle applies when savings are involved. Most financial advisers teach their clients to save big, invest into a porto folio, buy risky shares, pay off their debts first... These are sound advice (and in most cases they mostly benefit the adviser who is more likely the one to manage your money at a fee of course),
but not everybody is able to live up to them.
No one can spare more than he/she can live without. Eventually, saving more than you can afford will push you to draw from your savings funds until you will be left with nothing. Pretty much like living from hand to mouth.
There is however a simple strategy that anyone can use to save money and also accumulate great wealth without being a Bill Gates or a Rockefeller. It's all about sparing what you can live without.
Let's take a very simple example that applies to anyone:
' In every day life, we spend a certain amount of money on cigarettes,coffee,internet bundles,hot dogs,sweets,little treats,transport fares...Some of those spending could be useful but not necessary. The easiest way to start saving is to spare the amount of money you can live without on a daily basis.
Start by asking the question : ' what is the amount of money I can live without on a daily basis?' The amount of money must be easy to spare, and should not affect your daily activities negatively. If you live in the U.S, this is the question I have for you:
' Can you spare $10 a day?' I mean only 10, nothing else. In most cases, people will tell me that they can live without that $10 on a daily basis.
Fair enough. If you can live without that money, it also means that you can spare on a monthly basis $300. And on a annual basis, you could save $3600. If you just keep the same consistent habit of sparing the little $10, after 30 years, you will have $108000 plus compound interests.
Which one is better between $108000 and nothing?
That's a better self-improvement tactic.
That little strategy can help you to both save and pay off your debts in the same time. Don't wait to pay off your debts first! Save now by using that strategy of the little things.
I have used '$10' as a unit. But I know that some people can spare more than 10 bucks a day. Imagine how much one would get if he/she could spare 20,30 or even 40 a day?
'The affordable amount to spare is the amount you can live without.'
I once spoke to a guy , we will call Paul, whose dream was to send his little 4 years old boy to a decent pre-school. But he did not seem to afford it. Paul usually smokes a pack of 20 cigarettes a day and works as as a coffee barrister in a local coffee shop. After I analyzed the total costs of his monthly cigarettes spending, we both found out that the amount he spends on cigarettes monthly was enough to send his boy to pre-school and to spare a bit of cash for himself. Paul could not believe it.
Try doing the same exercise: 'find out where you spend your money on daily basis and ask yourself the question: 'If I stop buying this-------, is it going to affect me negatively?
If the answer is 'no', then you have just discovered a 'little pocket hole' where your money slips out easily.
Those 'pockets holes' the stuff we can live without like cigarettes ( that are not healthy), the daily glass of whiskey a the local pub, those four cups of coffee at our favorite coffee shop, the junk food we buy when we are not hungry, the paid gym contract that we don't honor,and so much more...
Wherever you are living, use the same strategy and adapt it to your own local currency . The amount unit might be different, but the strategy remains effective.
Can you live without 3 pounds or 20 rands or 10 euros or 50 yens... on daily basis?
'If you are consistent in the little things, you will take care of the big things.'