Saving is something, usually money that is being set aside for a future purpose. The future is the time many people plan to retire and are already making plans not to be financially stranded then. And one of the ways known to many people to make plans for the future is saving. It is a tradition that we all need to adopt to avoid financial embarrassment.
Life is full of demands, mostly monetary demands and no one has been able to shield himself from having expenses. Life has a way of throwing expenses at us and we have not been able to dodge those expenses. Most of us feel very annoyed and infuriated when the expenses we never incorporated into our budget for the day, week, month show up. And such expenses come in with a very heavy weight that the only option to take the weight off our shoulders is to attend to them. Some people live under the illusion of having to have more money so that they will have more than enough to carry out their responsibilities. The law of Parkinson says expenditures will always rise to meet income. It means that if your budget had always been predicated on $50,000 a month and you are fine with it and doing the needful, the moment your income rises to $100,000 a month, you will be surprised that some unexpected expenses will start surfacing. You will now begin to ask yourself some questions if those expenses had been lurking in the corner waiting for your income to receive a boost. They are more or less like hibernated expenditures. If care is not taken, you won’t save more than you have been saving while still earning $50,000 because now, you have more things to spend money on.
Parkinson’s law of money is actively in action in the finances of many people and fully validated. They earn more money and spend the extra income instead of saving or investing it. Your needs will expand so that you spend all of the money that you have available. Every month you tell yourself that you’re going to save ten percent of your paycheck; however, all sorts of things “come up”–a sale, a gift you have to get for a friend, and so on–and by the end of the month all of the money is gone. By the time you sit down to do an appraisal of your spending, sincerely, you will only be able to account for a meagre 20% of that extra money that you just lavished. So the goal here now is to break Parkinson’s law in such a way that your expenses will not be in direct proportion to your income. You have to make it of no effect in your finance so that as your income increases, your expenses will not increase.
One of the ways some people validate that law is what is termed impulse buying. You buy what you didn’t budget for because of how fanciful the item is or the way the cloths and the shoes will look on you. Or the gift you failed to get for your friend on his or her birthday because you didn’t have enough. Now that you have some more you can spare, you decided to buy it. Though such item might not cost you more, by the time you buy some more due to their relative cheap prices, they will have consumed a larger chunk of your money.
How to break Parkinson’s law of money
1. Stick to your budget. Set a limit on the amount of money that you have available for spending. Don’t spend outside of the budget even though you have extra to spare after exhausting your list.
2. When you have a pay rise, save the extra somewhere else and dispose like you haven’t had a pay rise so that you will be able to stick to your initial spending.
3. Avoid buying things on impulse as I highlighted above. Stick to your spending plan.
4. Spend your budget on the most pressing needs, in the order of their importance, not in the order of their perceived importance.
THE IMPERATIVES OF SAVING
1. Emergency. We need to save towards emergency. Emergency can come anything and woe betide the man that fails to plan towards emergency. We need to save money for that. The people you might want to run to to lend a helping hand might fail you if the emergency comes. But it doesn’t necessarily mean the emergency will come but it will be foolhardy of anyone not to prepare for eventuality.
2. Specific goals. Another thing you can save money towards is a goal in the form of a project you will like to execute. You have the goal in your purview and you set a time limit for it’s execution. Then that forms the central reason for your savings. But let the goal be something you can fall back on in the future. The goal must have the touch of savings. Some people’s goal is to buy a fanciful car, good for you if you have the money. But if the car you are using still takes you from one point to another, you can divert the money for a new one to an investment that will give you more money. All for the future.
3. Opportunity. We need to save in case an opportunity comes knocking at our door. Some opportunities have a tag of “an opportunity of a lifetime” which means they might not come again. But opportunity doesn’t come once, it comes throughout our lifetime. Only a wise man will prepare for it anytime it comes so that he can grab it. It might be buying a parcel of land at a discounted price or a house or a car. It might be going for a course that will impact well in your career or your family etc.
4. Retirement. Earn as much as you can earn now. And most importantly, save as much as you can save now for the sake of your retirement period. Don’t always have it in your subconscious that your children with take care of you in your old age, it is an unhealthy thought. What if they don’t? So to avoid that, plan your retirement savings well and stick to it faithfully.
WHAT IS THE % I NEED TO SAVE?
Your savings should have three different categories;
1. General savings. This category of savings should gulp just 20% of your savings anytime it is time for you to put something aside. Any money that comes in to you, put 20% of it into it. You have 80% left.
2. Necessities. Your day-to-day running of the home front and daily life should be given 50%. Don’t try to inflate it by shortchanging the percentage that goes into your general savings. So it is needful we find a way to prune our spending to fit inside the 50%.
3. Unforeseen circumstances. This falls under Emergency in the “imperatives of savings” above. Give 30% to it.
PRACTICAL TIPS ON HOW TO SAVE
SPEND LESS. Spend less and save more.
ACQUIRE appreciable property for the future
VERACITY of purpose
EARN more to SAVE more.