7: Savings

When we talk about savings, we talk about putting away something for a rainy day. But that’s only part of the picture. There are so many other reasons to save: to build up significant sum for investment or business, to pool enough funds to pursue a dream that might not earn you as much, to get yourself a well-deserved break, to have enough for your kids when they go off to college…I could go on all day. Most people know that saving money is a good thing — but significantly less people do it. Kitambo the reasoning used to be that banks only served the rich but today with one of the highest mobile penetration rates in the world and the financial service offerings that come with this, Kenyans cannot use that argument anymore. There’s also the argument that people just don’t have money to save — which to a certain extent holds water. But I’d argue that if you can afford a bottle of beer, you can afford to save. Saving is more about discipline than it is about figures. We all know examples of people who earned so little yet saved enough to do remarkable things. My enduring example is that of my grandparents who have never held formal jobs but who from their income as small scale farmers have managed to raise and educate fourteen children. Yeah, good luck beating that.

Most of what I know about saving money I have learnt in the last two years. I’ve never been spendthrift, but I had not taken a deliberate approach to saving before (which is probably as bad as being spendthrift especially now that we mostly pay using abstract cards and apps as opposed to tangible coins and notes). Over the last two years though, I have been more conscious about saving and I can feel the results. I cannot cite the numbers here (chiefly coz it’s none of your business) but I can say I have saved enough to invest in larger long-term projects and feel financially secure, for now.

Simply put, with savings, there are two major levers to move. First, reduce your expenses aka trim the fat. Second, put the money aside, damn it. Reducing expenses is deeply personal and so anything I offer you will be subjective. My rule of thumb is to not spend significantly on non-essential things (essentials being: food, rent, transport, airtime, clothes, power, internet, gym, healthcare, and the cats [how dare I forget the cats!]) that do not grow me or make me happy. Also, to only pay for value—not brands, not prestige, not social class, not cheap, not expensive, V-A-L-U-E. For instance, I found out that a gym membership to a good gym around where I live is 3500 shillings per month, but if you pay per session, it’s 200 shillings. Why would I pay 3500 to just say I have a gym membership while I can pay 2000 per month for three sessions a week which is what I need anyway? Plus I bet I go for more sessions than most people with memberships. Most subscriptions are a financial dumpsite. Ask yourself, do I really need to pay for 200 TV channels every month while I have super-fast internet (and I am rarely at home anyway)? Do I really need to pay for Spotify Premium alone while I can get a better deal if I sign up with friends or family—or find a cheaper or free alternative? Of course it gets ethically murky with things like Netflix when you can stream more shows and movies on free sites like Couchtuner and gomovies — but that decision is yours to make.

Another distinction I make in financial fat-trimming is between paying for something that helps me produce value and another one that helps me consume value. Fancy accounting types in suits might talk about assets and liabilities or depreciation and appreciation but that’s just not the way I am designed. The idea is to spend on things that help you create value, for instance, paying for internet at home might help you access learning materials that grow your skills while paying for a TV subscription will most likely take away the little free time you have. Buying land helps you grow food and provides another income stream while buying a car often drills deeper into your pocket for fuel every day. Of course, these examples are extremely simplified but you get my drift?

On putting money aside damn it, I’ve found that committing to certain days of the month, having a financial goal and making it harder to access your savings are some of the major keys. Having a set day of the month when you save (put it on your calendar if you use one, preferably the day or the weekend after payday or whenever your money comes in) creates a rhythm. Since we are creatures of habit, this makes us more disciplined. Having a financial goal you’re saving towards also spurs you on. You can see yourself making moves towards it and it’s really rewarding. The goal could be anything: a vacation, three months salary before you quit that soul-sucking job, a solid stash before you have your baby. The fact of the goal supersedes its content.

Finally, and probably most importantly, if you make it harder to access your savings, chances are that you’ll save more and longer. Like the kids in the Marshmallow test who closed their eyes and imagined how two Marshmallows in ten minutes would be better off than one now, making it harder to actually access your savings will flex your self-control muscles. Initially, I used to assume that money in my checking account was as good as savings. Major fail. Then I started using M-Shwari (for the non-Kenyans in the house, this is the savings module of MPESA…y’all know MPESA, right?) where the money is just a few more taps away. But now I am wiser. I might have gone rather extreme on the other end but it works for me. I opened a savings-only account (with no checkbook or debit card and with only one over-the-counter withdraw every three months) in a different bank all together. The effects of this are both financial and psychological. Financial in the sense that a savings account is likely to earn higher interest, attract less fees and you’re likely to keep the money there longer (banks also want you to put your money away damn it, which can be a good or bad thing…more on this later. They might also want you to spend all your money depending on the type of income they want from you). Psychological in the sense that even though you feel financial secure, you still have freely chosen limits on your disposable income. So you can essentially go broke — without really being broke — and that restrains you; it humbles you. It makes you richer in both money and spirit. Someone say Amen, damn it!

Notice I haven’t talked about the amount or percentage you should save. Again, that is deeply personal. Professionals will say 10% of your income, but as I’ll share with you later, take professionals advice as just that. Also, if you read my Zimmerman story you know not to take expert rules at face value. My method of determining the amount I save is simple—most likely because I hate writing regular budgets, which is probably not something I should be admitting to in an article giving financial advice. I first determine my monthly income. Then I list down and sum up all the essential and recurrent monthly expenses. In some months I might have a specific significant expense (e.g. getting a new phone or going on a weekend getaway with bae) so I factor than in too. I subtract this sum from my income and then give myself a rather generous, but tempered, allowance to do whatever the fuck I want to do with it that month. The rest I save and invest. And all this I do at the beginning of the month. Might work for you, maybe not. But at least find something that works for you and do it soon, especially if you are young.

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