The Road To Financial Freedom Pt. 2 2


How To Cultivate The Savings Habit

It’s not enough to say “I want to be financially free”, that is a dream but dreams without planned actions will take you nowhere. One of this planned actions is to cultivate savings habit. Savings habit will help you focus, it’ll help you to be prudent, and it will ultimately make you one of the few wise people living on planet earth.

Now, what if somebody has spending problem, that is he or she spends everything they earn, will bringing in more money solve their problem? Obviously, no. Okay, maybe they should change a habit, maybe they should change how they think about money, maybe they should change the source of their advise. Follow through and read to the end to discover something about savings.

How To Cultivate The Saving Habit

I discovered that the masses use a particular formula when it comes to saving. If you use this formula, you will end up broke. The masses subtract expenses from their income then save what’s left, i.e. Income – Expenses = Savings. Can you guess the problem with this formula? I know you can. The problem is that there’s often nothing left. You need to stop using this formula because people who use it always end up being broke. Even though they receive much but they still end up broke. Ah! What a dilemma. You might not have realise this, but the truth is that it cost more to live than what you’re earning.

If you fail to plan you have planned to fail. Click To Tweet

Here’s the formula I use, this is the formula for financial freedom, I subtract savings from income then spend what’s left, i.e. Income – Savings = Expenses. Can you relate with that formula? It’ll be nice if you can because the formula can change your whole perspective on spending your money. It can help you manage your money through cultivating a healthy saving habit. Prior to collecting any money, consciously or unconsciously, your mind will connect the money to something to expend on.


Reasons Why People Don’t Save

Here are some common reasons people give for not saving money:

  1. “There is always something I need.”
  2. “I Want to Live in the Moment.”
  3. “I’ll Start Saving Later.”
  4. “You Can’t Take It With You.”
  5. “I Don’t Have Kids.”

Always remember: a part of what you earn is yours to keep. Click To Tweet

The way to be sure you’re taking control of your money is to plan and follow through; do a budget before you start spending your money.

 

What Does Budget Has To Do With Savings?

Planning phase is crucial at the beginning of any endeavour. Like it has been well said: If you fail to plan you have planned to fail. You set yourself up for financial failure by not starting with a budget. Budget will help you:

  1. Know exactly how much you save although the ‘percentage to save’ is determined by you.
  2. Help you see at a glance how much you have for expenses.
  3. How much you can give to people or for a cause.
  4. Keep track of your spending pattern.
  5. Get ahead of unforeseen expenditure.

For me I save for investments. After keeping a 'safe-net' amount, I invest the rest. Click To Tweet

*Sample of a personal budget (see below).

 

Five (5) Ways To Save & Spend Money

1. Pay Yourself First. Of course you must have paid your tithe. You pay yourself after paying your tithe. I can testify that God pays you back in one way or the other. This is where you use the formula I shared with you above. Remember: after paying yourself comes other expenses. It is risky if you settle other things first before paying yourself.

2. Plan Your Spending. Approach your money-spending in an informed manner. Your monthly income (which can be pay-cheque/salary or business revenue) may be able to eat-up your expenses, but depending on your situation it may be wise to spread out your expenses into months or years. You can:
i) Decide on what you want to give in advance, or you can have limit amount for general or family gifts, it is your decision, make it.
ii) Decide not to be in a hurry to buy things especially things that has the tag ‘BUY NOW!’ Consider if you can buy at a bargain price and confirm if your budget can accommodate it.

3. Pay Outstanding Loan. I’ve come to understand that debt is good. Although, debt is bad for some people, especially people who haven’t understood how debt can be use for a good purpose. Wherever you fall, try to pay your debt promptly. I started working with an auditing firm after NYSC in February 2010, where I took a loan from my boss. I thank God for the understanding bosses He gives me. My boss, then, allowed me to repay the loan gradually and God helped me to pay monthly – it was deducted from my paycheck directly. The sincere truth is: I still take on debt and it’s being paid regularly. If I can do it, you can do it – the same way you should try to service your loan regularly. Paying small amount regularly is better than not paying anything at all. Also be careful not to accumulate too much debt.

4. Cut-off Meaningless Expenses. Like huge cost on data and calls, transportation and feeding, etc. I use to do 9G data subscription on Airtel NG for N3,500 (it’s a special package they put me on) but after reviewing this particular expenses I then switched to Glo’s Twin-Bash where N2,000 2G data subscription gives me extra N2,000 to call all network for 31 days. This was a huge savings for me because I use to spend up to and sometimes more than N5,000 on data and calls monthly. You may have to review some of these meaningless expenses especially where you have alternatives.

5. Save For A Goal. Aiming your savings at something would help you save a lot and will also help you spend less. For me I save for investments. After keeping a ‘safe-net’ amount, I invest the rest. You will agree that banks these days are not friendly. Almost everyone want your money but have nothing much to give you in return like interest or something. That aside. You should focus your savings on something dear to you, this may not necessarily be acquisition of things. As I’ve said; don’t just say ‘I want to be financially free’, you should learn what you need to do to be financially free then focus your savings on it – aim at it. You will be surprise how much you can achieve by doing this alone. Note: what you focus your money on can be anything you desire; it might be your education, ministry, or a particular investment – you define it and aim at it.

Focus your savings on your desires - aim at it. Click To Tweet

If you pay yourself first, have a budget to plan your spending, pay outstanding debt and cut off meaningless spending and save to achieve a goal, you will see your savings account grow. This can in fact lead to you having lots of investments to bring in more money for you. It’s not enough to say “I want to be financially free”, you have to do something. You can start by saving lots of excess money you have. Always remember: a part of what you earn is yours to keep.

I believe in you!

 

Download my pre-formatted personal budget (MS Excel) below. This will help you get started on where your money should go monthly or yearly.

Everything you’ve read is my opinion and it is not to be taken as investment advice because I am not your investment adviser nor have I considered your personal situation as your fiduciary. This post is for your entertainment and education only and I really do hope you have enjoyed it.

 

Now, go and be wise.

 

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2 thoughts on “The Road To Financial Freedom Pt. 2

  • Badhorun Omotoke

    I must say this is a very great enlightenment. Thanks for the information sir but I couldn’t download
    the pre-formatted personal budget

    • Abiola O. Omodele Post author

      I’m happy you’re enlightened dear Omotoke. I noticed the challenge also, it’s been worked on. If you’ve completed the form (by filling your name and email and clicking ‘send my copy’), please check your inbox for the follow up email. Thanks for your comment.