Savings should be the 1st Expense of Our Income

Everyone wants to become a Millionaire but to become one, one has to accumulate it. We have to dream and dreams do come true.  To accomplish that dream we need to have a GOAL.  What we need is to be committed to the goal we have set. On a lighter note, my Mentor  once told me “Commitment is like being pregnant — either you are or you aren’t”. There is no middle path.

Discipline and commitment are the key factors if we have to be successful in our quest to save a million dollars. We need to save at the top. “Savings should be the 1^st expense of our Income”. You see, there are two groups of people — Group A and Group B. Group A saves first  and then spends and the Group B  spends first and then saves (if there is any savings left out) . We have seen Group B works for Group A.

Right from the start of the day we  all are  inundated with messages that encourage us to spend – News Paper / Shopping Mall / Radio / TV Advertisements  like — Save Dh500 by buying this camera at Shopping Festival — how can one  save money by spending on something that we probably didn’t need in the first place?

If we have to be successful Savings should be the 1^st expense of our Income”. We have to save at the top.

One of the most simple formula to become a Millionaire is to have a mind set of “Pay Yourself First”.

Let me ask you a question … if your Employer told you today that because of economic downturn we are forced to have a Salary cut of 10% from this very month … what will you do ??????  Assuming your salary of Dh10,000  from this month would be Dh9,000 would you be able to manage?  Most of us would find a way of managing as there was no other option as well.

Why can’t we save this 10% ?

We left our home countries after leaving behind our parents relatives and friends to  save for our future, earn more and to provide ourselves and our families with a better lifestyle. We do enjoy a better lifestyle here till the time we are here in UAE but many a time we forget the other reasons like going back to our home country  and don’t save. Majority of us will face a Huge financial difficulties  if we do not save for tomorrow.

To become Millionaire it is not what we earn is Important … however What we SAVE is of UTMOST importance. In the many years I have spent in the UAE I have come across many individuals who earn Dh50,000-60,000 a month and I know they will not save a million because their habits are not right. And I have met people who earn Dh10,000 and Dh12,000 a month and have saved good amounts of money because they pay themselves first.

Many of us would seriously like to know where does our Salary goes by the time months end. Isn’t it??

Let me take you through the journey where the salary goes.

Specially in UAE during a typical month.

The first 10 days - 30% of Monthly Income - you work for the landlord.

Next         7 days – 25% of monthly Income -  you work for your child’s school

Next          4days – 15% of Monthly Income     -  you work for grocery (LU Lu / Spinneys )

Next          4 days-  15% of Monthly Income - you work for your utility ( DEWA / SEWA) companies,

Next         4 days – 15% of Monthly Income – you work for the bank — to pay your car installments / debts

At the end of the month you’ll find you have worked the whole month for others and not yourself.

Pay yourself first. “Savings should be the 1^st Expense of your Income”

A key to a disciplined savings habit is also to live within your means.

We often come across individuals who spend 100 per cent of what they earn and some who spend 120 per cent or more than their income (Credit Cards do help them / special Offer do help them)

Credit cards, special offers and promotions, advertisements from banks and stores stating: Use this credit card and buy this 70” state of the art LED TV and get a 40” TV free. Or quite often at Gitex we see — buy the latest mobile and pay for it in 12 months. These offers entice us and very often make us spend on items we don’t need or plan to buy. How often have you gone into a shopping mall and come away buying everything else but the thing you went there to buy in the first place?

Buy One get one Free … Except the better half everything comes free.

Living within your means being aware of what you need and disciplined enough to not purchase the things you don’t — no matter how tempting the offer. Sure there are times when it makes financial sense to go for a good offer, but it should be for the things that are necessary or purchases we plan to make in the very near future.

Here are some tips on small things that we can implement to help us have more money to save:

Pack-a-lunch — fast food lunches are not only generally unhealthy, they also can be expensive over time. Make and pack your own lunch before you go to work.

Skip going out to a restaurant — have a candle light dinner at home with your wife or loved one. If you dine out frequently with friends get creative and reduce one outing to a fun evening at home.

Avoid getting trapped into a flashy lifestyle: As my friend would say — he’d be a millionaire by now, only if his neighbour didn’t keep buying newer and bigger things.

Give up smoking — in addition to the health benefits, you also save money.

Make a list before going shopping and stick to it.

Pay your bills on time and avoid late fees.

Making small little changes in our lifestyle can really help increase our savings by maybe 10 per cent. How often do we go to a restaurant and tip the waitress 10 per cent extra just because she was pretty?

There are many more such measures that can be put in place. All of us need to periodically examine aspects of our expenditure and evaluate its necessity. Yes, we have to enjoy life, I am not saying that we have to take away the joy out of our lives but we have to be responsible for our finances as well.

In the next parts we will look at how much you need to save on a monthly basis to achieve a million and also take a look at the real secret to going seven figures large; a miracle ingredient in your investment mix that Albert Einstein deemed “the eighth wonder of the world”.