Saving Dos & Don’ts: Tips from The Richest Man in Babylon
When it comes to saving, everyone has a different approach and there is no one size fits all. We all have different levels of income, for our different circumstances so take what applies to you and make it work. When you can, save more, if you can’t, still save a little, but indeed your goal no matter how much you make should be to set aside a portion of your income every month. Yes, even in the hardest of months and in another post about emergency funds, I’ll explain why. But let’s look at some do’s and dont’s of saving.
1. DO save a portion of your income: No matter how much or how little, the discipline here is putting aside something every month. George S. Clason in ‘The Richest Man in Babylon’ encourages that to be a tenth of what you earn. In the book, a young man named Arkad who was very poor, sought the advice of a very rich man who told him that the first step to building wealth was to ‘pay thyself first.’ “A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford. Pay yourself first.” It is recommended that the best way to do this is the 50/30/20 rule. 50% of your income is apportioned to your necessities which include bills, rent/mortgage and groceries. 30% towards your wants or nice-to-have expenses like going to the cinema, friends birthdays or going out for dinner and 20% should be apportioned between savings and paying off any debt.
2. DON’T save only after spending: The issue with doing this is you will always have an excuse of why you’re short of money at the end of month and so cannot ‘afford to save’. The myth of saving is that people feel like they will have less if they take out a part of their income first and put it away. They think they will have to substitute that shortfall with something else. The truth is, you would hardly notice the difference. Again, an excerpt from the aforementioned book: “Each time I was paid, I took one from each ten pieces of copper and hid it away. And strange as it may seem, I was no shorter of funds than before. I noticed little difference as I managed to get along without it. But often I was tempted, as my hoard began to grow, to spend it … but I wisely refrained.”
3.DO get another account for your savings: I encourage everyone not to keep their savings in the same account as their current/everyday account. Just having a mental note of how much your account shouldn’t go past because that’s your ‘savings’ just won’t do. A lot of the time we don’t check our account before we spend, we just spend and then come back to see how much is left. Therein lies the danger of having just one account. In fact, I’d go as far as saying, have it in a separate bank or in an account you don’t see. Out of sight, out of mind works very well here. If you don’t see it, you don’t know you have it, and therefore you can’t be ‘tempted’ to dip into it.
4. DON’T save to save: The irony, if you’d call it that, of saving is that we don’t save just to have money stashed somewhere. You save to invest. You save an emergency fund. You save to travel/buy a house/plan a wedding. But you NEVER save to save. Stagnant money is more a loss than it is a gain. “If you would become wealthy then what you save must earn, and it’s children must earn, that all may help to give to you, the abundance you crave… Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed, the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”
I hope these few points have helped you think about saving a little differently. If it has, why don’t you share it with a friend or two who you KNOW needs to read this.
– Bukiie Smart