Saving simply means putting aside money for future use. You can save towards acquiring a property, education, pension etc. Most individuals have the habit of either spending too much and saving too little or do not save at all. In order to achieve financial freedom every Individual must have these three types of savings;
- Personal Savings – this is the most common type of savings. After you have paid for all your expenses, what is left should be housed in your personal savings. This is the type of savings you can access anytime you need to make purchases such as buying a property, vacation, rent etc. You can start by saving 10% of your cash inflows – i.e. monies you receive from all sources, it could be from your salary, commissions, bonuses, profits, gifts, allowances etc.
- Emergency savings – this kind of savings intends to help you pay for things that are not included in your monthly budget. Most people have lost their jobs during this pandemic which has left them in debt, Unexpected illnesses have taken away livelihoods; these and many more are the reasons we all need emergency savings. Emergency savings/ funds are monies set aside for unforeseen circumstances. If you want to live a debt free life, your sure way is having an emergency fund you can rely on when unexpected expenses arise. Only access your emergency funds when you have exhausted your personal savings.
- Retirement savings – after you reach compulsory retirement age and must go home and ‘rest’, will you have enough money to live a comfortable life or you’ll prefer to live under the benevolence of your children and relatives? If you had an 8-5 job, you are sure to have your social security to rely on, but will that be enough? Do you have any other retirement savings elsewhere you can rely on? If you are self-employed, do you have any plans towards your retirement, or you intend to work all your life? Life insurance and pension companies offer variety of products that you can take towards your retirement. To be able to live a comfortable life after you retire, you must start saving towards your retirement today.
No matter how little you earn, try as much as possible to save a portion.
Do not save what is left after spending; spend what is left after saving – Warren Buffet