Spending or Saving – every penny counts

By Finbar Garcia LUTCF, FSS, MFA

Happy New Year, readers. For many of us, at the stroke of midnight as we ushered in the new year, we made new resolutions and some not so new ones. While I wanted to continue our chat on Business Insurance, I felt compelled to focus on this elusive goal called SAVINGS.
I am quite sure many persons start previous years with this in mind and while striving as hard as possible, never achieve it. Did you not say, ‘Spend less…Save more’? So, what causes us to not follow through?
Discipline is the key to achieving this elusive goal. At times we only say it but put no plan of action to actually achieve it. So where do you start?
First, you must decide how much you want to save this year (usually 10 per cent of your gross annual income). Write it down, put it on the mirror of your dresser, stick another in your bathroom, stick it by your desktop or laptop. This would reinforce the visual part of your goal. As you see it every day it would resonate in your mind.
Second, look at your budget not your shopping list. Where did you place the item called savings? Is it at the bottom of you list? Move it to the top of your budget as your first expense. By doing this, you would now be allocating the balance to essential budgeted items. Savings should never be the residual from your budget, otherwise you would never save.
Third, how do you itemise your budget? As I mentioned some time ago, your budget has two main parts: Fixed Expenses and Recurring Fluctuating Expenses. There is a third part called Discretionary Expenses. These are the not needed: sudden Friday eat outs, movies, and that outfit you really don’t need and may only wear once. These expenses are the main culprits that erode your ability to save and save with a purpose.
Fourth, based on the amount you want to save, give yourself a timeline, divide it into equal monthly amounts, and monitor it every month.
There are months you may not achieve the quota. Don’t worry. If you are over, it’s because you limited your expenses and the extra went to your savings which is good; if you are short, check over your spending.
If you maintain the savings as your first expense, then this would not happen to you. If you have met all your expenses at the end of the month and it’s just before your next pay cheque/salary, and you realise you have cash remaining, move it out and put it into your savings vehicle.
Most persons live from pay cheque to pay cheque and if an emergency arises, they are now in a worst-case situation, because they never considered savings as an expense.
What is your Debt to Savings ratio? and I don’t mean your debt servicing ratio. This is your ability to continue to live comfortably, servicing all your expenses for a period of between 6 to 12 months without an income.

“The first ever cordless phone was created by GOD, He named it Prayer. It never loses its signal and you never have to recharge it….Use it anywhere”      Unknown.

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