BY WACEKE NDUATI-OMANGA

“I am thirty-two years old and have never been able to save. I have tried to work with a budget to control my spending so that I can save but it never works out. At the beginning of every year I have resolutions, make the sacrifice for a few months but then I eventually find something to spend the money on e.g. an emergency, household item etc. Please help.” Anne.

This is one of the most common dilemmas people write in with. How to save? Many people want to save but they are unable to. Let’s first get the basics out of the way. Saving is firstly done by consistently putting aside money. It is not a one off affair but rather a habit that is cultivated. If you earn money every month, then you should save every month. The consistency is key.

Secondly, savings are put aside in an account that is not used for day to day expenses. Never mix the two. The account you get paid into or use to withdraw every day money is not the savings account. Treat savings like a bill. When you get paid, remove it from your everyday account and transfer it somewhere else. This way you get to see it accumulate. Now with the structure of savings out of the way we can respond to Anne’s dilemma. Her problem is indiscipline around her spending or what it is otherwise referred to as delayed gratification. Without this no one can save. However, she has to associate a benefit to this delayed gratification.

It’s like food. We would love to eat junk food every day because it tastes good. However, we make ourselves eat healthy food, that may not taste as good because we want to maintain our weight, feel energetic, live well and the other associated benefits.  If we get really determined to cut down weight, we will even get on diets. It’s the same thing with money. Spending money is fun and more preferable. However, we delay our spending or save because of an associated benefit of some form.

These benefits are sometimes labelled as goals. We may have goals to buy a car, buy a house, save for school, college education, retirement etc. Anne should definitely think of some goals that are important to her. Goals that make it worth the present day ‘sacrifice’. However, the challenge that Anne may have with some of these goals is that they are in the future.

It may take long to achieve some of these goals and really burnout her staying power. Just like with the diet, if it takes too long to lose any weight, one might give up. So as much as we have long term goals, it is important that we are able to see short term progress in some way. People who have been saving for a while have experienced the benefits of this habit. They therefore don’t find it hard.

Those like Anne, who have been on and off have not experienced this hence why a long term goal may not be the way to start. Lunch money profoundly changed how I experience savings. I realized that if I carried food from home instead of buying it, I could save over Kshs 100, 000 a year. That was enough to go on holiday. I did the saving and went on holiday with it. The cost was lunch money; the benefit was a holiday. I created a new experience.

I had a client who for most of her life had firmly believed that investments were hard and had a similar problem like Ann with saving. He eventually saved for three months, invested these funds in the stock market and was able to start making sense of it. The experience for her was being able to pull this investment through. She doesn’t struggle so much with saving anymore. Saving just for the sake of saving may not work. Be clear on what the savings are going to do for you both in the short term and the long term.

Given where Anne is coming from, words like ‘sacrifice’ are very telling. I no longer consider it a sacrifice to carry food from home. I now associate financial and health benefits with this.

If you have both experiences and goals that have meaning to you, the delayed gratification is seen more as a means to an end rather than a sacrifice. Sacrifice for many people has a negative connotation, therefore they will not see it through. We need to learn to look at the discomfort as stepping stones. I would also look at the amount Ann commits to with new year resolutions.

Many people set amounts that they are actually not ready to commit to in the heat of the moment. Start with the amount you can commit to and build on that. It shouldn’t be too easy but also should not be outright unachievable. Ann needs to work on developing a savings habit. A dose of reality along the way will also help. We must move beyond our comfort zones.

It will be important for Ann to realise what risks lie ahead if she doesn’t save. What happens if she loses her job for example? She will not be able to sustain herself. Many people started saving and investing aggressively because of going through circumstances that taught them this lessons quickly. The ability to save is the stepping stone for wealth creation.