Home' Trinidad and Tobago Guardian : June 11th 2017 Contents 50%
Pie Chart above
to apply the
Rule to your
Sunday, June 11, 2017 guardian.co.tt
Guardian Media Limited
It’s an unfortunate reality that not
many people are taught to be financially
literate from an early age. Schools teach
French, English and Spanish, but never
the language of money. Most times, man-
aging money and saving is something that
many of us have to learn on our own, and
in some instances through trial and error.
However, if we are to achieve any of our
financial goals, developing the habit of
saving is where it all begins.
Common Challenges to Saving
Saving money is harder for some than oth-
ers. Among the many challenges to saving
(and trust me, there are MANY!) - two
stand out: Either information on saving is
too simple, or it’s too complex. On the sim-
ple side many people are told, “You need to
save” but the’re never given answers to the
“how”, “why” and “where” questions asso-
ciated with saving. Put differently, the need
to save is not connected to anything concrete
or tangible - saving is most successful when
it’s tied to life goals. On the complex side, the
information provided about saving, and the
multitude of options (some poorly explained)
can be a daunting proposition for many people
to figure out. Complexity and saving don’t
often go hand in hand. The real key to saving
then, is identifying the “happy medium”.
Common Excuses For Not Saving
Combined with the existing challenges
to saving, the narrative that many of us tell
ourselves - and the excuses we create for why
we’re not able to save - does us no good. Typ-
ically, individuals can be grouped into three
schools of thought. Firstly, there’s the “I don’t
make enough to save” school. Anyone who
say’s he or she does not make enough to save
is believing a fallacy. With saving, its not
about how much you earn, its about disci-
pline. Earning huge amounts of money can
in fact be detrimental to developing healthy
savings habits. Many professional athletes,
entertainers and even executives have gone
broke in spite of earning fantastic sums of
money. The second school of thought in-
volves those who say: “You only live once,
so why bother save?”. In every respect this
is a cop-out designed to avoid doing the work
and building the discipline required to save.
Saying “you only live once” ignores the idea
that life, and all its unpredictability can be long
and filled with financial hurdles to overcome.
Finally, there’s the “I don’t know how to
save” school. This group tends to suffer from
informational shortage and encouragement
but once set up right, can thrive as savers.
Lifehacks For Saving
Now that we’ve identified the challenges
and vanquished the excuses, a straight path to
saving awaits us. So lets tackle some lifehacks
for saving our hard earned money:
1) Separate Your Money - It’s impor-
tant to set up mechanisms to separate our
money for the purpose of saving before we’re
even able to touch it. This usually involves
setting up a separate account, away from our
regular bank account, dedicated for saving.
For example, having a standing order at a bank
that receives our salary and sends it to another
savings account is among the easiest lifting
we can do. Once this is done, it becomes auto-
matic and the next step is simply determining
how much we want to save.
2) Apply the 50-30-20 Rule - If we
think about our income as one big pizza, then
we can divide it up into segments where we
funnel our money into the appropriate areas.
Lifehacks for Saving
So, according to the 50-30-20 rule, 50 per
cent off our income should go to mandatory
life expenses (bills, debts, kids, medical etc),
30 per cent to discretionary expenses (hang-
ing out, shopping, travel etc) and 20 per cent
to the almighty savings. The cool part about
segmenting your income in this way is that
you can often see areas where waste is taking
place, and thus you can take the appropriate
3) Avoid Lifestyle Escalation - The
key to financial freedom is living on less than
you earn. Truthfully, if every time our income
increases we adjust our lifestyle in tandem, we
will never be able to save. Avoiding lifestyle
escalation means living on less than we earn,
and saving the difference.
4) Set Goals - As stated earlier, saving is
most meaningful when it is connected to our
goals. When we set goals (say buying a house
or car), developing the discipline associated
with saving becomes easier because of the
motivation to fulfill our goals.
Developing the habit and mentality of sav-
ing can take time. It’s important that we are
patient as we work toward cultivating the dis-
cipline required to save. We may, from time to
time, relapse into unhelpful financial habits.
It’s part of being human. However, as long as
we endeavor to do better the next time, our
efforts will ultimately pay off.
Coming next week...
Important Things to Save For!
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