Teaser: There are four main occasions that present themselves as the right time to start saving part of your earnings.
Saving money is one of the most difficult things to do. The reason stems from the fact that the needs of humans are unlimited and insatiable. There are theories that conclude that, no matter how much anyone earns, he or she is likely to spend all and even more in debt. This theory could be the reason even oligarchs and billionaires have debts attached to their names and/or estates. There are also theories that suggest how to cut down on expenditures to save. The challenge with this expenditure cut theory is that every financial issue must be solved provided there is the means to spend.
It is surprising that financial issues that an individual could be very concerned about and spend on when he or she has the means, will be glossed over when he or she does not have the financial means. Also, individuals may be used to spending their current disposable income. Trying to save current disposable income creates a psychological inconvenience for the individual in the process. The right time to save is thus a combination of saving extra income that is yet to be received. There are four main opportunities, in the form of extra income to be received, that could present itself annually for the individual to save
1. When the annual salary increases or point jumps: For most formal sector workers, salaries are normally increased annually. Though these salary increases or point jumps can barely take care of the inflation rate, individuals can target the effective dates of which these increases to start saving a portion of their salary. Without any salary increase or point jumps, saving part of your earnings would be a cut in the existing whole salary. Therefore, when there is an increase or point jump, saving that increase does not affect the current salary in nominal terms.
2. When deductions for loans and insurance premiums have elapsed: Deductions on loans and insurance premiums can take a big chunk of one’s salary. Individuals who wish to save part of their earnings without thoughts of unnecessary inconvenience can target the period when their loans or insurance premium deductions are ending. Timing this period will ensure that the ability to survive on less income previously is not reversed.
3. New jobs or promotions or new jobs: People change jobs when they want. People land first time jobs annually and people get promoted regularly. Before new jobs or promotions or job changes, individuals had a certain standard of living which could be maintained even after promotions or new jobs. Individuals can then channel any extra income out of their new jobs or promotions into savings for the future.
3. When a second or extra income avenue is gained: People are ready to take multiple jobs these days for a lot of reasons. Before securing an extra job, the individual was used to the existing salary or income. Even if the person was not used to the old income, saving part of the extra stream of income by the individual can still be considered by him or her as rewarding knowing extra income has been added anyway.
The concept behind all these timings to save is that the individual is used to surviving on an existing income. Therefore, any extra income coming out of an annual increase or point jump or stoppage of loans and insurance deductions, gaining an extra income stream and new jobs can be saved before being used to the new income where it will be difficult to save.
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