“A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much as you can afford. Pay yourself first…Wealth, like a tree grows from a tiny seed…the sooner you plant that seed, the sooner the tree shall grow…the more faithfully you nourish and water that tree…the sooner you may bask in contentment beneath its shade”
– George S. Clason, from the book The Richest Man In Babylon
When I was a kid, I used to have this small piggy bank given to be by my parents. Whenever I get a perfect score in school, I get PhP 1 as reward. It was fun getting an award every now and then. At some point, I realized I was already getting better at school because my piggy bank was almost full with coins. Saving money was a lot simpler then. And I was even keeping all the money I saved, not just a part of it.
Unfortunately, that simple lesson didn’t stay with me for very long.
When I started earning money from my very first job, all the money I earned, I just spent them away. I spent it so quickly a few days after my paycheck arrived, I was already looking forward to the next pay day. It didn’t cross my mind that I was living a dangerous lifestyle which was made even worse by the new credit card that arrived in the mail.
When I received my very first credit card, I was so ecstatic. I was so proud of myself, I decided to make a show out of it. I bought a washing machine, a stove, a new pair of shoes, and a bunch of clothes all at the same time, even without the money to pay for it. I only had to use my new credit card!
That experience triggered a sequence of events that left me helpless for quite a long time. I realized very quickly that the small amount I was earning was not enough to make a huge dent on my increasing credit card debts. Most of it was used to pay off just the interest. There were times I even had to do a cash advance on my credit card just to get the money to pay for my rent. It was an embarrassing experience, one that I promised to myself never to allow it to happen again.
I tried really hard, for so many times to have the “discipline” to save money so I can pay off my debts. I am not sure if it’s just me, but I never was able to make it work. An emergency would always come up at the last minute and all the money I’ve saved, I’d spent them away.
It was really frustrating. You’re working very hard to earn money. Looking at your payslip, you find out that a huge chunk of your paycheck is taken away as taxes. After all the deductions, you are left with very little amount of money which you’re supposed to stretch to pay for your credit card debts and your basic needs.
What worked for me, and worked so well, was enrolling into an automatic savings plan in our company. One day after getting really frustrated with my “lack of discipline”, I went ahead and enrolled into the automatic savings plan. I initially chose the smallest percentage (i.e. 2%) possible to be the deducted from my paycheck and transferred into my savings account every month. Even though that amount seems small right now, at that time, it was really a big deal. I felt that the 2% was being taken away from me.
At first, it was hard to let go of the idea that the small amount that I was earning was still being reduced. Later on, I realized that I can actually live with the 98% without sacrificing a lot of things. Most importantly, it gave me confidence that I CAN actually save money. That realization was a big thing because, it gave me the courage to face the world with head held high knowing that I have money saved somewhere, even if it is just only a small amount.
Encouraged by the results, I increased my savings percentage to be 5% of my paycheck. At that time, going from 2% to 5% was a big deal. The extra 3% was a huge deduction from whatever I can spend. I knew I needed to be watchful of how I spend money if I ever want to make it.
For example, I used to pay fees when withdrawing money from a bank different from my own. Because my life always seemed to be in an emergency, I always felt into a trap where I needed to withdraw the money right away and be forced to withdraw it inspite of the fee. The fee is small, but when you take into account how many times I had to pay the fee, it really becomes significant.
After a few months, I increased my savings again to be 10% of my paycheck. At this point, I was really nice enjoying seeing my savings continually grow. After a year and earning an increase from a promotion, I felt confident enough to increase it even further to the maximum percentage allowed, which was at 20%. That was a stretch for me at the time, but seeing how my money was growing every month was a source of inspiration for me.
Make it automatic
The great thing about making this process automatic was that it takes away the decision making from my hands (at least after I’ve set it up). When before, I had to always remind myself to have the discipline to save and not touch it, now, all I do is choose the percentage and forget about it. In addition, getting my hands into that money had a certain inconvenience attached to it. To withdraw, I had to go through all the trouble of going to the cashier’s office (which was open only on specific days), fill-up the form, wait for it to be processed and receive the amount. The inconvenience was enough for me to just decide to leave the money there.
When I resigned from that company a few years after, the money I got from that automatic savings plan was able to help me out when I transitioned to a job overseas. Some of it was also used as initial budget in preparation for me and my wife’s wedding.
Looking back, these blessings would not have been possible if not for that first step to decide saving just 2% of what I earn. The good news is that you too can save. Start small. Take baby steps. Build that confidence. Set it up and forget about it. And soon, you just might be surprised how BIG it would have grown.