Ways To Maintain Proper Savings Habit
Most good savers have a good understanding of their expenses, know how to control them, are good at saving money, and know how to resist upgrading. Successful people usually follow four steps to prepare for and complete their goals. Let’s look at each step and how we can apply it on and off the long distance trails of life.
Continue to save despite the odds
The more cash you have stowed away, the better you will weather downturns. How much cash is enough? The last recession in Nigeria lasted for 15 months. Therefore, saving a year’s worth of expenses will provide a sufficient buffer to weather nearly any recession. Once you have that level of protection, you can confidently adopt upgrades, as long as you maintain that one-year buffer. You can submit without fear.
If you live below your means and you control your desire to upgrade, you probably won’t notice recessions. On the other hand, those who constantly push the envelope of upgrades and live on credit will have to retrench their way of life significantly. The process of cutting back is depressing for anyone. That’s why living beyond your means is so risky you’re bound to get disappointed.
Know your expenses
First, you must know your annual expenses. Add up the amount you spend every year on all your major expenses, such as rent/mortgage, telephone, clothes, education, utilities, entertainment, transportation, fitness center, and booze. There are software programs that help you figure out your annual expenses
Always calculate nominal costs
Get into the habit of calculating the nominal costs of a reoccurring expense before committing to it. Figure out how much the subscription will cost you over a year, or even five to 20 years. When the next salesman tells you, “Hey, it’s only N500 a day!” remind yourself that it’s N182500 a year, and ask yourself if that extra N182, 500 at the end of the year would be nice to have it saved.
Most of us don’t have a year’s worth of expenses saved. We feel pretty good if we have a month! Getting a year’s worth of expenses saved requires resisting every tempting upgrade until your life becomes highly inconvenient without it.