Start saving money from your first job

You have just got your first job, out of school or university, and for the first time you can afford your expenses on your own. The purse or wallet you have always wanted is somehow now within reach, and the dream of travelling in your own car is a possibility, but not immediately. In my case, I walked at least six kilometres up and down from my school to the Railway station daily, but I always had my dream car in mind. Today, I own a luxurious car, a dream I has since school days. I was able to achieve this due to money saving habits.

Last week we talked about how to be happy in your first job. One might argue how a person can be happy without spending money. After all everyone needs money. In fact, when I started my career as a trainee in the accounting field, I was paid only Rs 60 per month. From the first month onwards, I started saving Rs10 per month. Subsequently whenever my salary was increased, I increased the saving amount too proportionately. Though I started to save Rs 10 per month, now my saving method has changed from month to day.

When you receive the first salary or the first pay cheque, you will experience tremendous joy. But how much do you save? It depends on how much you put money aside daily or monthly.

How do you become a money saver? I will first tell you how not to spend too much money: not by using discipline or willpower. Discipline and willpower only work in the short-term. What works in the long-term is understands your spending habits. Once you understand, you can change by building new habits. That’s how you become a money saver.

Your annual salary maybe huge, for a person in twenties. But take out provident fund contributions and other statutory deductions, divide the number by 12, now you’re looking at what your monthly take-home is. With this take-home, draw up a realistic budget, that allows you to have fun but also allows you to live life and have some savings.

Just because you are in your twenties, does not mean that you would never have an emergency or want to retire for some unpredictable reason. By the time you are in early thirties, your responsibilities increase. You wish to have your own home, vehicle, may think of starting up your own business and also retirement issues take priority. You have to also take care of your wife and kids financially. As a result you start cutting expenses even on your basic needs just to pay your regular monthly premiums for your home loan and vehicle loan.

Instead all you should do is set aside six months of expenses in an emergency fund. If you set yourself up properly when you are in your twenties, things will be a whole lot easier in the long run. It is fun for newly recruited employees to spend everything they earn. Believe me; if you do not understand spending habits, it is going to leave you financially handicapped for the rest of your life.

If you dispose of all your income in your twenties, there is no question about it; you will be financially down in no time. You can set the rest of your life up, or you can make everything a little bit harder. Here’s how to go with the former.

Ten ways to build the habit of saving money

Set goals

What do you want?

* Do you want to have your own house?

* Do you want to be financially independent?

* Do you want to get into debts?

A goal will give you a reason to save money. If you have multiple desires, start with one goal. Once achieved, set your mind on the second.

Set a deadline

Set a date by which you want your goal achieved. Write both on a piece of paper. Put it somewhere you can look at it multiple times a day. The best place is somewhere close to your bed. Look at your goal and deadline on waking up and before going to sleep. It will remind you why you are saving money.

Track expenses

You probably have an idea of how much you spend, but unless you keep a track of every cent, that idea is inaccurate at best. Here is a simple way to track your expenses. You probably carry a diary wherever you go. Note everything you spend in your diary. When you get home, copy everything to the book to be maintained as a daily record of expenses. When you get married the importance of this habit will come to light. However at the end of the month you will know exactly how much money you have spent and on what.

Analyse costs.

The next month, you will be able to cut down or reduce all unwanted expenses. This will also help you to check where your money goes. The first time you analyse your expenses it can be shocking. This is your first wake up call.

Make a budget

Calculate how much money you need for: food, amount to be paid to your mother, travelling expenses, bills, clothes and leisure.

Remove costs from income. Now you know how much you can save each month. Even if it’s not much, it’s better than nothing.

Pay yourself first

Make the first bill you pay each month the one to your savings account. Just like all your other bills, there’s no way around. You must pay it month after month, unless you’re in debt. Then the rule becomes: “Pay your debts first”. My advice once again is not to get into debts.

Earn more save more

Save a fixed percentage of your income. This way, as your income goes up, so will your savings. 20 percent is a good start. This is a must. If you cannot it means that you are living beyond your means. It is then time to wake up. Remember what we discussed at the beginning of the column. Try to save some fixed amount daily.

Think of saving

If you have money left at the end of the month: save it. You don’t need to spend every cent earned. It’s okay to buy things. But make sure you really need them. Do not spend just for the sake of spending.

Wake up

I wrote in the introduction that you need to understand your spending habits. You need to understand why you buy things. Do you buy things to impress people? to be part of the group? to fulfil other’s expectations? Next time you buy something, ask yourself: Why am I buying this? What are my real motives? Don’t judge. Just notice.

It takes time, but once you get it, it’s eye-opening. Your life will be simpler and you’ll avoid many financial headaches. Trying to keep pace with others is a never-ending game, one you cannot win.

Read get rich slowly

Your environment influences your personality, and thus your habits. If you want to build the habit of saving money, surround yourself with people who save money. The book Get Rich Slowly is a good place to start. You’ll become a money saver in no time.

Special tip:

If you don’t save now, you will never have money. No matter how much you earn. Manage your money wisely; you will be a happy man.

Caption: Save 20 percent of your salary on a monthly basis