How do I save when I earn so little?

This undoubtedly is a question that most people have asked themselves at one point or another. "The monthly income I get is barely enough to cover the essentials", I have had people say. In an environment characterised by low disposable incomes, it is not conceivable how people would be expected to have any meaningful savings. In any case, the basic living expenses have to be covered first.

While all this may be true, the importance of savings cannot be overemphasized. As individuals, we all have goals and ambitions, and their attainment hinges upon having a solid financial plan. Herein lays the fundamental tenet of savings. One has to lay out a plan detailing what they want to achieve financially and what it will take to achieve it.

Warren Buffet, the renowned Billionaire American Investor, is famous for advocating that people should not save what is left after spending, but rather, they should spend what is left after saving. This principle flies in the face of the seemingly conventional wisdom we have been taught over the years. It can be inferred therefore, that it is a matter of how one prioritises their needs and wants, barring the level of income one earns. Our wants have to be subject to our needs.

Clear-cut financial goals are important as they give the much needed impetus for people to start a culture of saving. Naturally, it gets easier to follow a given course of action if there is a set objective to attain. Once realistic goals are set, the important thing is to START. One commonly cited excuse people have, is that they just do not earn enough to have any surplus funds left for savings.

However, it is important to understand that no amount of money is too small. Often, people wait too long in the hopes that they will one day have a lump sum which they will start saving. This however, doesn't always turn out to be the case. Consequently, most people fail to ever have any meaningful savings. In finance theory, there is a fascinating concept of compound theory. In essence, this means that interest is earned on interest. The interest earned on an amount is added to the principal amount which will then earn further interest. This effectively means that one's savings are compounded frequently, and will multiply over a given period regardless of how small the initial amount is. As a result, once a cycle of saving is started, this will in turn spur off successive bouts of income which will accumulate over a period of time.

Discipline is vital in any noteworthy endeavour, and savings are no different. In a pressing economic environment like ours, granted, there are ever increasing demands on somewhat static incomes, but the ultimate objective should keep one motivated to keep saving. People do not earn money from spending; rather, wealth comes through savings. Savings are thus a critical for individuals, households and ultimately the nation. As such, it is critical to inculcate a habit of savings with a long term view.

They say, "Procrastination is a thief of time and killer of dreams." It is simply not enough therefore, to desire to want to save, but action must be directed towards making savings a habit. When starting, it does not necessarily mean large jaw dropping amounts. Instead, just getting into the custom of regularly setting aside money, whatever the amount will suffice. In time, once diligently pursued, the culture of saving will prove fruitful and will lead many to a path of financial freedom.

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