Why are you always saving money?

If you asked me this question a few weeks ago, I’d have given you loads of answers. For an emergency fund, to reinvest in my business, to take advantage of investment opportunities, for school, for a vacation, to get myself nice stuff, to build wealth, to buy my freedom from my 9 to 5 job, and many more…

For a long time, I always thought that I had to have a reason, a goal, to save money.

That was until I read what has become one of my favourite personal finance books, The Psychology of Money by Morgan Housel.

The Psychology of Money by Morgan Housel is available on Jumia

Morgan argues that we don’t need a goal in order to save money. That having reasons for saving money would only make sense if we lived in a predictable world, a world without surprises and painful curveballs. We don’t live in such a world.

‘‘The first idea-simple, but easy to overlook-is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate.’’ – Morgan Housel

As kids, they sold us this idea of a perfect future. A straight line to wealth and happiness.

We were told that if we worked hard in primary school, we’d get admission into high school.

They said if we worked hard in high school, we’d get admission into college or university.

If we worked hard in college, we’d graduate and immediately get a high paying job. This would come with a nice car, a nice house in a posh neighbourhood, a loving spouse plus kids that we can easily provide for.

How far are you from this perfect future?

My life isn’t anywhere close to this perfection. It’s chaotic and full of financial anxiety.

Reality hit differently and we soon learnt, the painful way, that this thing called adulthood is tough, full of surprises and is unpredictable.

The one thing that makes the curveballs bearable is having a financial cushion. You don’t give life a heads up to throw a curveball your way. It just happens. So you should ALWAYS be saving money.

But since Morgan also said that humans always need to be convinced to save money, I’ll go ahead and tell you why you should be saving money.

 

Why saving money is important

 

1. Pay for financial emergencies

 

We’ve already established that every now and then, life will throw curveballs at you.

This reminds me of one of my favourite poems, If by Rudyard Kipling. He says ‘if you can meet with triumph and disaster and treat those two imposters just the same…’

That should be your financial goal. To be financially stable enough to handle a financial opportunity or investment payout with the same calmness you would a financial emergency.

This will happen only if saving becomes second nature. Aim to be the kind of person who gets excited by the idea of saving money and having money in your account for no reason, just as you would for spending on a vacation.

A life where you don’t have to go into debt, get depressed, call your family, friends and even strangers to lend you money when faced with an emergency exists.

Start by saving a 6-months emergency fund.

“You own the things you own and they, in turn, own you.” – JL Collins

2. It gives you freedom

 

Having large amounts of savings gives you freedom in different ways.

Being the last born in our family means that if I wasn’t financially disciplined, I’d have to be dependent on my siblings or elder cousins. Being dependent on someone financially means having to follow their rules. I hate rules.

When you have your own money, you call the shots and do whatever you want, while being respectful to people.

When I learnt that people can actually retire before 65, that it’s actually possible to not have a job that ties you to a cubicle, I was mind blown! Money gives you the freedom to decide when you want to retire. The freedom to work from anywhere, to choose who to work with, and which companies to work for.

If you’re in debt or living paycheck to paycheck, you fear being fired. You’re usually on autopilot at work and can almost do anything you’re instructed to.

When you have a fat savings account, you fear your boss less. You know that you have options. Money gives you the courage to question when there’s an injustice at work. To have your voice heard, to contribute confidently.

My biggest motivation to save more has always been the fact that I hate mornings. I’m a complete zombie before 10 am, but I’m expected to be at work because I’m not free!

What freedoms would you enjoy if you had more money?

Related: Why financial planning & awareness is important

 

3. It gives you options

 

The other day, while talking about how to handle money in relationships, my pal said ‘power shifts where the money is.’ That shut me up for a moment.

As much as it’s technically impossible to find a partner who earns the same as you and to always split all bills in half, it’s important to have your own money, to learn how to manage it and how to grow it.

We’ve all seen and heard of people who stay in abusive relationships because ‘where will I go?’ When you have your own money, it gives you the confidence to leave such situations.

You see all those screenshots you have in your phone of dream destinations? Yup! Saving money can make that a reality.

Last weekend I met this lady who has lived in the US, Japan, Dubai and the Netherlands. I’m the kind of person who always asks ‘how did you do it?’ She said that for the most part, her parents paid for it. As much as I don’t have parents who can do the same for me, I want that life! I want to have the option of living in different countries. Globetrotting the world is your birthright.

Other forms of options include who you choose to work for/with. We don’t always have to be full of fear while interviewing for a job. With enough savings, you can get to turn down a job after an interview because you didn’t like your boss.

He who buys what he doesn’t need steals from himself. –  Swedish proverb

4. You can comfortably fund your large purchases or occasions

 

I have a friend who built her parents a house when she was in her 20s. The first time she told me about it, I thought she was lying. How’s that even possible? To me, some of these milestones could only be achieved when you’re 35 and above.

She lived a frugal life because she was determined to give her mum (the sacrifices we make for our mamas 😉 ) a safe and comfortable place to live. She built the house in phases while taking breaks to work and save some more.

This is why I keep insisting that you should talk about money with your friends. It opens you up to possibilities. These conversations skyrocket your ambitions. You leave comfort zones when you hear what people do while working normal jobs and having high savings rates.

Talking about occasions, this might put me into a lot of trouble but I have to say it.

I’m not a fan of people who fundraise for weddings. I believe that this is one occasion in your life where you should be able to plan and save for. I find it especially disrespectful when people add me to wedding committees and set an amount of money that each committee member is supposed to contribute. Say what??? It’s the audacity for me.

I have contributed to weddings before, most of them being those that I wasn’t asked to contribute. I gave the money as a gift and I’m usually super impressed by the love birds for being such responsible adults.

I think that doing this gives your friends an opportunity to support you in other ways such as when hit with a medical bill because that’s beyond your control seeing how terrible most of our health care systems are.

Cheers to being responsible adults. Yes?

“As individuals, we only have one obligation to society: To ensure we, and our children, are not a burden to others.” – JL Collins

5. You get to enjoy life

 

How many times have you seen receipts of money you spent and you just can’t wrap your head around how you spent all that money? I have. And I’m sure you’ve also been in the same situation.

You get to enjoy the good times with people but you deal with the receipts alone, behind closed doors.

When I realised how much internal shame I experience from such decisions, I decided to get married… to my budget!

People avoid budgeting because they think that budgets will prevent them from having fun. That they’ll have to stick to just paying bills and other boring stuff.

On the contrary, a budget allows you to put money towards what you care about. You prioritize your basic living expenses because that’s what responsible adults do, but then add a budget for whatever form of fun you enjoy most.

Saving money towards a vacation or a night out with your crew allows you to spend guilt-free. You have fun without thinking about the consequences. Yup, a budget should allow you to pay your bills on time, invest to secure your future and also have fun.

I wrote a whole piece on how to feel rich even on a budget. And also one on how to create a budget that works!

 

6. You avoid unnecessary debt

 

As a teenage girl, I observed that my mum always complained about loan deductions from her payslip. One day I asked her about it and she told me ‘tuturagio ni loan’ (we live through debt).

I wouldn’t say that my mum was in debt because she didn’t save. Our parents went through a lot and did miraculous things using meagre earnings. They took loans to put us through school, we should be eternally grateful. I told the full story here.

From that one conversation about debt, I concluded that as an adult, we literally have to live through debt. That there’s no other way around it. This is how I ended up buried in debt.

Well, I grew up and realized that debt, especially consumer debt doesn’t have to be part of my life. And it shouldn’t be part of yours either.

Save money so that you don’t have to be a burden to your family and friends all the time. Save money to avoid paying interest rates to financial institutions.

 

7. Saving money reduces stress

 

That you have to avoid people, even your friends when you’re indebted to them makes me want to be more and more financially responsible.

I’ve seen people who will avoid being online on WhatsApp, they’ll read messages through the notifications bar or switch off data while reading the messages, just to avoid the confrontation with the people they owe money.

You can avoid such stress in your life by both saving money and being a good customer/friend of your money lenders.

Did you know that financial stress reduces your IQ? By not being a good steward of your finances, you’re impairing your cognitive abilities. I wrote about it here.

‘Sort out your inner voice-and what’s actually right for you at a given time in your life-from all the outside noise. It will help you feel so much better about living your life on your own schedule.’ – The Financial Diet

8. Saving money ensures that you leave a good legacy

 

My friend and I share an interesting life goal. We want to save enough money to cover our burials when we die. We have factored the fact that we might not be living in our countries when that time comes, which makes us save even more money towards this.

We might be financial control freaks, and we’re aware that there’s only so much we can control but the point is, we don’t want to be a burden to our families and friends.

We literally would love to rest in peace.

Away from that, don’t you guys just admire people who leave wealth to their kids? I do. I’m among the people in this world who have zero inheritance. It’s actually negative if you factor black tax. I have a deep admiration for people who work hard, invest and manage their money well enough to leave some to their kids. Life is easier without financial traumas.!

For the married folks in here, and those with kids, I have a life lesson for you. A friend of mine, yeah, I talk about my friends a lot haha taught me that when you have a family, your money does not belong to you. It belongs to your family. You cannot be out there wasting it, you have an obligation to take care of your people. It’s their money too.

Let’s aim to build generational wealth, to try our best to not only pass the right money mindsets to our kids but also reduce financial traumas. Shall we?

It’s almost Christmas, I’d want you to enjoy the festive season without having to worry about getting into debt and being stressed in January as you penny-pinch and struggle to pay the debt.

Create a financial system that allows you to stay ahead of the game, one that allows you to keep the money after you earn it because that’s something you can control. Want to get more saving tips? Subscribe to this blog 😉