The importance of savings

The main reason we end up having a family is because of this romantic notion called love. We swoon, we blush, we fantasise, and then we purse—all in the name of love. Then we have a family and we live happily ever after, right? Wrong. We form a family, and then we start this struggle called life.

Scientists have explained this genetic programme that is engrained to every single living thing in the world that drives us to procreate to ensure the survival of our specie. When there were no computers yet, no mails, no malls, no Holllywood, no Bollywood, no Mills and Boon. It’s just us, homo sapiens barely standing erect foraging for food and staying away from trouble (predators, baby! It’s the wilderness.)

And then, as our genetic programme commands us to procreate to perpetuate our race we find a suitable partner. Anthropologists have often believed that the family forms the primary economic unit.

Yes, no matter how we may vehemently deny it, our marital bond all boils down to being just the modern version of our ancient ancestors’ quest for survival. After the elaborate wedding ceremonies, and after the honeymoon, we find ourselves taking stock of the basic reality: our economic pursuits.

We need to earn, make money to pay the bills, raise children, etc.

It is so unfortunate though, that after society has placed so much emphasis on an individual’s capacity to earn, it stops short at emphasising the value of frugality. Commercialisation takes over. Digital media bombards us with the latest gadgets that make us drool so much that we have to reach for our credit cards. We are so programmed to want the things we don’t need. And sadly, we are so programmed to compete that it translates to our wanting not to be left out with the latest fads and trends. "We 'have to' keep up with the Gupta's"!

The truth is: the amount that we save could be more important than the amount that we earn. Have you ever thought about how much money you had and you have nothing substantial to show for it now? I remember looking at my totally useless (because they’re outdated) gadgets, at the exercise machines that sit rusty from disuse, and I remember wondering where have all my money gone while I have my credit card swiped for my son’s hospital bills because I have no cash!

Parenthood has a way of jolting us out of our follies. Being broke while facing a family emergency could be any parent’s worst nightmare. The amount I earn became irrelevant because I have nothing saved! This was one important lesson I learned, and thankfully I learned it at the early stages of our family life.

To avert future occurrences of this nightmare, my wife and I have devised a system of making sure we always have something left for the rainy days:

Savings first
The usual mistake most people commit is to allocate their month’s earnings to expenses first, and if ever there’s something left, they save it. Who are we kidding? There always is nothing left! And if ever we get lucky with a little left-over, we wantonly spend it on non-essentials to “reward” ourselves for working hard.

What we did was: for every net income we get, we immediately save a certain percentage and put it in a separate bank account. Yes, it could make your monthly budget a little tighter than it already is, but we consider “savings” as important as everything else on the budget.

What do this savings do for you?

1. It makes you feel secure knowing that despite present financial difficulties, you still have something to turn to when things get worse.
2. It’s like a fire extinguisher. It sits there seemingly useless, but when fire breaks out...

30-day budget
We were so reckless before that what we spend totally depends on how much cash we have on hand. This was totally irresponsible! Haven’t you noticed that no matter how much you earn, it always is not enough?

Now, we have a strict 30-day budget that we have devised to religiously follow. When you have a budget, you control your spending—this could sound too basic that anyone with a bit of a gray matter between the ears knows this. However, you would be surprised to discover that a lot of us have totally neglected this simple bit of wisdom.

30-day advanced allocation
We devised this system to further entrench our 30-day budget plan. When we had enough savings, we took out the exact amount that we need for our 30-day budget. We get a sense of empowerment and security, knowing that today’s expenses is already taken care of, and what we are earning now would be used for the next cycle. This is a 30-day buffer to shield us from any eventualities.

What it does

1. Makes our spending money sit longer in the bank.

2. We have 30 days to work on our next cycle of expenses (“oh-uh! We’re gonna be short next month! What do you say if we do a garage sale? No? Okay, I’ll just take in more clients then.”)

3. Helps you stick to your budget.

Use accounting tools
There are a lot of useful accounting software like PeachTree Accounting tool that could hugely impact the way you manage your personal and business finances. I am using Microsoft Money to help me keep track of our finances, stay a step ahead of our bills, gives us a good idea of where our money is going, what percentage are we spending on what, and it gives us an insight on our future cash positions with its scenario-making feature.

There are a lot more ways to motivate ourselves to stay on our savings program. You could add yours. What is important is, we must strengthen our “earning” mentality with the necessary discipline in savings.