You can build your wealth by saving

Author, Dr Jeanpo Olowo. PHOTO/FILE

What you need to know:

Save on vehicles and shelter. Don’t buy stuff you don’t need

Tresidder of says, “Great wealth builders focus on both saving money and earning more.”

In Foundation Analysis Building Testing (FABT) framework, savings is part of the building stage, as block two. The words “saving” and “investing”, are usually used interchangeably. The sole purpose for both though is securing one’s financial freedom.

Savings are short-term, used for emergencies and purchases, and can be done without much research. On the other hand, investments are made to achieve bigger goals such as building wealth. Both are of great importance in wealth building. If you are not doing either, the time to get started is now.

 Saving money means it is available when you need it and has a low risk of losing value. Investing carries a long-term connotation. However, the biggest difference is in the risk involved. The general rule of thumb, savings should be short-term while investments should be long-term.

How much should you save? You know best from your monthly income and expenses. Where should you put your cash? In order to access your money quickly during an emergency, the best place to keep it is in a liquid market account, such as a checking, savings, or a money market fund at a mutual fund company or brokerage firm.It would be good for that account to earn you interest as your other income stream. Why is it important to fund your saving account? So that it grows, to earn you more money. Consider using all or part of the money you earn outside of your usual pay check to contribute at least a portion to your saving account as well.

You can track your savings by putting a deadline, timeline, and value to your goals. For instance, if saving for a family vacation; your target is $900, to be done over nine months and withdrawn at year end. Now, here you know how much you need, your monthly savings, and when to draw it without fees. You can’t save unless you have money to save.

Save on vehicles and shelter. Don’t buy stuff you don’t need.  Save a percentage of your income, strive to earn more and more, invest now, invest in education, save part of your monthly income as soon as you get it, rather than setting aside what’s left over try to automate your savings.

 Your savings strategies could include creating a spending plan (budget), spending less, paying off your debts to free up your monies, getting creative in making more money, like a part-time job, selling stuff you don’t need, or getting a side hustle by identifying a skill you have that can get you a money-making business.

Paying yourself first, this means treating your savings like any other bill and earmarking a certain percentage of every pay check to go into it. Take baby steps towards saving, if you struggle with this. Start by trying to save just Shs35,000 for a specific purchase or expense.

Remember that saving is a discipline you cultivate over time and emergency savings is the foundation of a sound financial plan. A true emergency is something you have little-to-no control over. Typically this should cover three to six months’ worth of your expenses. You know your goals and how much you need to set aside. Do not wait to save. Time is the greatest resource to grow your money and achieve your financial freedom. With a relatively small amount of money, you can start saving now.

Dr Jeanpo Olowo, Advisor/Consultant: Financial & Business Operations.