The Basics of Saving

Ismail Mizyan Naeem
Jul 16 · 4 min read

It’s that time of the month again. You’re getting your paycheck. You know it, your friends know it, somehow the entire country knows that you are getting paid. Your friends call you up one after the other. “Ey koba coffee eh neitha?” You reluctantly say no, but they keep pushing until eventually, you end up at the cafe’. Soon after, the monthly bills start coming. There’s that new phone you want to buy, plus you have to buy a gift for your significant other too, right? Before you know it, your hard-earned money is gone and you’re none the wiser about where it went. The next month comes along, and this cycle repeats.

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We’ve all been there. I was terrible at managing my money, and this has happened more times than I’d care to admit. However, money management isn’t something that is reserved for the people in suits with “big” money. Here are a few tips that have drastically changed my approach to saving money and hopefully change yours for the better.

Before that, let’s acknowledge the elephant in the room — rent. I know a lot of people, particularly in Male’ (Maldives), struggle with this. Unfortunately, this is an issue beyond the scope of this article. Despite that, we can all still learn to manage our money.

With that out of the way, here’s how I approach saving money. I’ll explain how I categorize my expenses, a 50–30–20 ratio guideline for saving, and why I now “pay myself first.”

Expense Categories

Categorizing your expenses will help identify where you can save money, and help you spend better when you need to. There are two main categories of expenses: Needs and Wants.

Needs: Fixed and Variable Expenses (50%)

This is the first category of expenses. The majority of your income would be spent on your needs. As a rule of thumb, you’ll be spending 50% of your income on expenses that fall under this category.

Needs are what are absolutely necessary for you to survive. That means rent, food, electricity, petrol, things of that nature. If you have loans, you also need to make your monthly payments.

It might be hard for you to believe, but you don’t need Netflix.

Needs can be broken down further into two categories: fixed and variable expenses. Fixed expenses are, well, fixed. You pay the same amount every month for rent, loan payments, and annual fees on your vehicle. Likewise, variable expenses are any expenses that vary. For instance, you wouldn’t spend exactly the same amount every month on groceries, electricity, and petrol.

Breaking down your needs into fixed and variable expenses will help you identify where you can save money. For example, you can’t change how much you pay for rent. You can, however, opt to buy cheaper groceries or buy only as much as you need. With variable expenses, you have a bit more wiggle room to cut down your costs.

Wants: Discretionary Expenses (30%)

The second category involves anything non-essential, like Netflix. This is where you have to start making sacrifices. If you’re spending 50% on your needs, that does not mean you spend the rest on your wants. As a general rule of thumb, you should aim to spend a maximum of 30% of your income on your wants.

You should hang out with your friends, get your significant other that gift, but maybe you don’t need the latest iPhone. Ultimately, the whole point of earning and saving money is so that you can live a happier life. Spend on the people you care about, including yourself. But before you spend on a non-essential, remember to ask yourself whether it truly adds value to your life.

A quick note for any University students living abroad or about to make that shift. For the entirety of my degree, I was stuck either overspending on take-out meals or eating rice with a can of tuna every day. Trust me, learn how to cook. You don’t have to be a MasterChef, even a few simple dishes would go a long way.

Savings (20%)

“Do not save what is left after spending, but spend what is left after saving.” — Warren Buffet

This is one of the golden rules of saving money, and it’s exactly what it sounds like. Before you spend on your bills, groceries, or even the monthly coffee you give to that friend who always appears on the first week of every month and mysteriously disappears for the rest, you pay yourself first i.e., save your money. Generally, you should aim to save 20% of your income.

When you pay yourself first, you are essentially telling yourself that you are more important than your landlord knocking on your door. If 20% seems too daunting, start with something small. When you start seeing your savings start to grow, that can be a motivator for you to save more.

The other reason you pay yourself first is that you will never run out of things you spend on. You still need to spend on your needs, but the problem starts when your wants also start to become needs. When you pay yourself first, you have to stick with your budget, and since you must spend on your needs, that means you can better manage your non-essentials.


Like I said before, money management isn’t something that is reserved for suits. Take the time to sit down and make a budget with 50–30–20 as a guideline. Be sure to categorize your expenses so that you know where you can save money. This is the first step, all that’s left is to put it into practice. I found it difficult to stick with a budget when I started, and I’ll admit, even now I tend to overspend. But hopefully, with some trial and error, we can all achieve financial freedom by choosing to pay ourselves first.

The Basics of Saving

Learn how to save using this simple savings ratio

The Basics of Saving

This article explores the steps that can be taken to achieve financial freedom, with a 50–20–20 ratio as a guideline on how much to spend and how much to save.

Ismail Mizyan Naeem

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The Basics of Saving

This article explores the steps that can be taken to achieve financial freedom, with a 50–20–20 ratio as a guideline on how much to spend and how much to save.