A Gentle Reminder To Save Before You Spend

When it comes to setting asides money, there are two kinds of people. There are those who spend their funds and save out of what’s left and there are those who pay themselves first – that is, save before they spend.

We’ve all heard about how certain reality television show winners, lottery winners, musicians, and athletes had so much money at some point and eventually wound up a few years later in penury.

This truth should help us determine what the true definition of who a rich person is. A common phrase by Warren Buffet is that: “The rich save before they spend and the poor spend before they save” and it is true now as it has always been.

“Rich” isn’t how much money you make but how much money you save (and invest.)

So much has been said about the need to save, control your expenses, and of course, invest. This is because the financially independent person is one who has a grip on each one of these elements.

There is no gainsaying the fact that a knowledge of these things will protect you from possible challenges and embarrassments. Since we’re in the festive season and spending money is the order of the day, this article is simply a gentle reminder that you cannot be financially free without saving.

When it comes to setting asides money, there are two kinds of people. There are those who spend their funds and save out of what’s left and there are those who pay themselves first – that is, save before they spend.

If you’re not on the second team, then your savings will most likely not be as good as it should or even exist. There are many reasons why this simple concept is important:

When you spend before you save, you will more often than not spend more than you should. In order to have control over your finances, you should be able to predict how much is going out to meeting your needs and how much is being saved.

In order to reduce the shock at what you find in your savings account when you check your account statement, you must have a definite savings strategy – one that is not left to chance. It gives you a sense of achievement and strength to take on life without so much worries.

Also, when you spend before you try to save, you might not just end up not saving at all but end up in debt. Not having a definite savings plan means you only save when your expenses are not high and there’s a little to spare.

It could even just be when you get a bonus cheque. What happens here is that you don’t operate within a specific financial figure and this means you can keep pushing – keep spending until you have nothing left and you might have to borrow.

However, when you save first diligently, you will have only a fixed amount of money to spend and this will force you to rank your needs and wants, and control your spending with ease.

Finally, you have a chance to make more money. Saving first sends your money ahead of you to work for you – even passively. Saving first is what lets you invest and investing is what makes you wealthy.

If the old lottery winners we described had saved first, you can bet that their funds will have earned them a lifestyle that will not fade when the cheques stopped coming in.

As Campbell McConnell put it, “Savings, remember, is the prerequisite of investment.”

Written by Lawretta Egba.