My grandfather had a lot of books at home. The shelves were full. Including gems like Picture of Dorian Gray or Catch 22. But when I was little, I was more interested in Aesop’s fables, short stories with a decent number of pictures. Always with a lesson at the end to remind people of the age-old truth.
There was a lion underestimating the mouse that later saved him from the net.
An observer watching the sky and not noticing the well beneath his feet.
Or a cricket who had a party all summer and froze to death when winter came because he wasn’t preparing for rainy days.
So how should we save if we don’t want to end up like a cricket from a fable? And what are the benefits of saving except “not freezing to death in the winter”?
On average, women in the UK have savings of £6900, while men have on average at £13000. But also 40% of people between age 22 and 29 have no savings at all.
I’m sure you’ve heard the phrase, “Pay yourself first.”
I give myself money or party-party scene
No, not at all. This means that the first thing you have to do after you get paid is to put some money aside. 10% would be great. If you can afford more put aside more. But if 10% is too much for you, no worries even 5% is better than nothing.
You should put the money in the bank. Pillows and socks are out. If the bank charges you for maintaing the account, change your bank. This fee is the biggest indecency there is. Basically, the bank wants you to pay them so they can take your money and lend it to someone at 13% APR and then give you 0.01% interset so you don’t cry too much. In my opinion, you should get 13% just because it is YOUR money, while the bank could get 0.01% as a commission. But we would have to come together and take our money out, just to remind them who is here the Boss and who is just the service provider we can do without.
Back to saving. Open another account to which you will send your savings. This is a very important part, separating savings from current month income. You are putting your money out of sight and “out of reach”. If I see £4000 in my account, I will use £4000. But if I only see what is left from the last paycheck and the next one is not comming anytime soon, I will do everything to make sure that I will not run out of money until next paycheck arrives.
It is good to have at least 3 months of income on your “emergency fund” in case something bad happens (you lose your job, a major repair on the house, your car broke down, your parents need to borrow …). There should be no debit or credit card tied to your savings account and some recommend that your savings should be in a different bank than your main account. If it is harder to access your savings there is lower chance that you will spend them for something you’ll regret after a week. Having most of your money on another account have many advantages. It protects you from scamers who call people from “your bank” and they need transfer your money to a “secure” account. Because your money already is on a secure account. And if your debit card disappears, you’ll know that in worst case you will lose only money which is left from last paycheck. And even if somebody puts a gun to your face: “Sorry buddy, I really only have £200 in my account.”
The money saved has a good effect on your self-confidence. Thanks to them, you will not let others treat you like a piece of shhhh-ajt. If you live from paycheck to paycheck and you don’t have any savings and let’s say your boss tells you, “I know you had 5 nightshifts in a row but we need you to take two more on Saturday and Sunday, please sign here that you actually want it. Oh and on Monday you start with morning-shift. If you don’t like it, there are 10 people in queue waiting to take your job. If you don’t have money and you desperately need that job, you will sign anything your boss tells you and agree with whatver he will say.
But if you have saved 1 year worth of income, your conversation with your boss, let’s call him Phat Chris could look like this:
You: “Good to know you have 10 people who can come to work over the weekend. So, I’ll see you on Monday.”
Phat Chris: “Wait, wait. It was a joke. We really need you to come over in the weekend.”
You: “You sound desperate… Is it really that bad?”
Phat Chris: “Situation is really bad, company can face fines if we don’t work on weekend.”
You: “If it’s so bad, you can count on me on Saturday and I’ll take triple pay.”
Phat Chris: “You want too much and I need you for whole weekend.”
You: “By the way, will you be here over weekend?”
Phat Chris: “No, I will spend my time with friends and driving arround on my scooter.”
You: “Really? Well… it’s okay if the company can’t afford to give me triple pay for my overtime… I’ll see you on Monday.”
Phat Chris: “You won. Well, Saturday only, triple pay. ”
You: “Thanks boss, you’re so Phat.”
Another good piece of advice is to rename the account to what you want to save for. For example, A trip around the world, a holiday in Thailand, a diamond engagement ring, Maserati GranTurismo … This will make you more willing to save and there is less chance that you will withdraw money and use it for something else.
And the last step of saving is: as soon as the next paycheck arrives, you have to put everything what is left from previous month to savings as well. This way you will ensure that you are only spending money which you earned in current month. Remember that spending more than you earn leads to very unpleasant places.
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