No one on earth can save money that does not exist!
You cannot save money that does not exist. To save money, it
is necessary to have money. This is such a simple principle, which everyone
should know, but not everyone applies. Those who adopt this principle, however,
can be successful in saving money.
The problem goes something like this: I want to save, but my
level of earning is not enough, and I do not have enough money to save. Most
people have ambitions to save more and spend less, in order to build a large
pile of wealth. Others earn money but spend too much of it; they do not have
much when time to save comes. Even people earning as high as $10,000 per month,
have this complaint, the same complaint heard from those who earn as little as
$1000 a month!
What is cause of the problem? It does not seem to be the
size of the income. If it were the size of income, then the higher earner
should not have this complaint, and they should be satisfied with their savings
because of the higher earnings.
Amelia had the same problem. She says:
“I was working an office job, earning about $200 a week. I
found it difficult to save money for my future. I wanted to own a house
someday, a dream I would have loved to come true. The pressure of expenses ate
up every penny that I had. Almost every week, what was left to me were my empty
hands. I used to blame my job, saying that it was a job that could not offer me
enough money to save.
Then I decided to change my job. Fortunately, I was
successful at my new job. I joined a company as a junior manager where I earned
$3500 a month. Finally, I was expecting to be able to save for my dream house
with my higher income, but what I was not expecting was an equal increase in my
daily expenses. Sure, I was able to maintain a higher level of lifestyle on the
new salary, but at the end of each month, the situation was not different… I
still wasn’t able to save money!”
Amelia’s situation is typical of those who have trouble
saving money. They often ignore the fact that as income increases, so do the
daily expenses that match a new lifestyle.
The income-expense pair goes hand in hand, which causes
problems for people who try to save money. People expect to be able to save
when their earnings rise, but it doesn’t happen. A proportional increase of
expense with the rise of income is the culprit. Despite the higher income, the
ability to save remains the same, and you find yourself in the same situation
time and time again, heading to a poorer future or retirement.
Amelia remained in trouble for some time, but she found a
simple, interesting, and workable solution that works in almost any situation.
She says:
“One of my friends told me, ‘Amelia, you earn good money. Why
don’t you put some money in the bank at the start of each month? It will be out
of sight, and you will be able to save it by setting it aside from your
expenses.’
These words had a great effect on how I thought about money.
Before, I always thought of expenses. I made lists of items to buy without
budgeting the money that I need to save. What I was lacking in my situation was
the ability to set aside extra money from my earnings at the right time. The right
time to put it out of sight was the time when money is available at hand. The
right time was not after doing all the purchases and buying all the items I
needed. The right time to save is at the start of the week or month, when you
get your paycheck. If you put some money in a separate account, you are forced
to cut your budget. A smaller and smart sized budget will cut you shopping list
short.
It took me several years, but I managed to buy my house.
Thanks to a small piece of advice: save money when it is available to you.”
This principle is not just for people working or in
business, and is indeed a basic and generic principle to fit any context. How
can you save money that does not exist?
If you have spent money, then you do not have money, and you
have missed the right time to save, namely, when the money was available.
My friend’s son, Riley, experienced a situation like this.
After he graduated, he began work in my office, and we grew close. I asked his
input on this valuable principle of saving money, and this is what he said:
“Like a lot of students, I wanted pocket money for things I
loved to do and wanted to buy. In college, I realized that the pocket money I
got wasn’t very much, no matter how much the actual amount was: whether $50 or
$500 a month, there was much to do on campus. When you’re hanging out with your
friends, there’s a pressure to conform, to spend money and have a good time
with them. Things get even worse if you start trying to compete, like showing
who can buy the nicest things for their girlfriend!
“On campus, I was
taking business management, and I received an allowance of $100 a week. I
dreamed of buying a heavy bike, with which I could get to school, and take my
girlfriend on long rides to the nearby riverside. However, it seemed like I
would never be able to achieve this. Rising college expenses made it very
challenging to me to set aside some extra money. It seemed like I would spend
all my money a day after I got it. I applied for a part-time job at a
restaurant, working as a service crewman, and I was lucky enough to balance my
work and studies successfully. I was now earning an extra $50 every week, but
the saving situation didn’t change. I still spent almost all my money hanging
out with my friends, and none of it was going towards my dream bike!
What changed my situation was the idea to save money in
advance. The idea came to my mind when I saw that a student coworker of mine at
the restaurant had a heavy bike! I asked him how he managed to save up for the
bike, and his answer was surprisingly simple. He told me that he saved money
immediately when he got it, and saved before spending anything. I followed this
principle and started putting a portion of my money into another account when I
would receive it, whereas before I would only spend it. That coworker put me on
the right track, and eventually, I was able to buy my bike!”
No comments:
Post a Comment