A journey of one thousand kilometers starts with one step. So does accumulating wealth. Progress begets progress. While I cannot claim to have millions of rand in my name, I have managed to buy my last 3 cars for cash. In fact, everything I currently own was bought for cash since 2008. Phones, household appliances, laptops etc. How did I manage to do it? By saving each month. Saving money is a habit. A good habit. A habit most people are not into. Not because they don’t want to. They just lack the will to do it because results aren’t instant.
Most people blame their low salaries for their lack of saving. Even when their salaries doubles or even triples, they still say the same thing. It doesn’t matter how little you earn, you need to put something away each month. The rule of thumb is at least put away 10% of what you earn. Unlike other habits, this is a difficult habit to get into because majority of people only earn money once every month. it is not something that you can do every day for 21 days. This habit takes months to get used to. Success rates is also lower than other habits.
It is hard to save when you don’t have a goal in mind. So, to make it easy for yourself, set a goal to buy something after some months. Let’s say you want to buy something which costs R12,000 after 12 months. Open a notice deposit account and instruct your bank to deduct R1.000 from your account each month to that account. The amount you set must be small enough that you won’t even feel. It mustn’t be an amount that will cause havoc to your budget. The aim is to get into the habit of saving at first. You can always increase the amount you save each month, at a later stage. After some few months, your budget will absorb that little amount and you will get used to it. When you get used to it. When that happens, you must know that you have now managed to get into the habit of saving.
While I am a big proponent of saving money, I feel the best form of saving is through paying your high interest debts first. It doesn’t make sense getting 5% interest while paying 27% credit card interest. In such kind of scenario, you aren’t saving money, you are losing money. Better to add that amount into getting rid of debts. That’s what I did also. I got rid of my debts first until I have zero debts before I even thought of saving money.
Each rand you pay towards paying off your credit card debt, you earn an interest of 27% instantly. That’s R27.00 interest for every R100 you pay towards your credit card. The converse is also true. You are paying R27.00 interest on every R100 you owe on your 27% credit card. So by paying your credit card debt, you get results instantly. Set aside any amount not on your budget and pay it towards your loans. Pay them off and start your journey to financial prosperity. When you have zero debts, you sleep better. You don’t panick when you receive private numbers because you know the calls if not from those pushy Edgars debt collectors.
To recap, get rid of debts first. By doing that, you get the highest results instantly. Only then you can save. Most people will ask, what if you go through a crisis and need the money. You can still use credit card if it is a real emergency. In fact, insurance was made for that reason. To prevent those emergencies from crippling you when they happen.
This article is the fourth article in the series of getting into a habit. The plan was to write more articles on this series but this is the last one of the series. I have said whatever I needed to say on the topic of getting into the habit.